Senior Citizen: How to invest during Covid19 times !!!

 In India We have a lot of people running around with Conflict of interest [They recommend you some product and they earn commission out of it ] . After all everyone has to earn bread and butter but problems come when they push us a high commissioned product and keep their interest before us. I tell you to avoid Relationship Managers (Especially bank).

I have the same problem mentioned by you for post office guys. Highly unorganised and you need to again and again ask them for interest certificate ,  renewal. it s a pain in the digital world they have not evolved . Things have become so easy now a days in bank and mf front . 

We can go in this order or priority before you make any investment.

Please give all nominations properly for all investments

1. Emergency (1 Year of Expenses in Easily accessible Fixed deposit) - Estimate Honestly how much Monthly Expenses and extrapolate it . See if your employer offers health insurance else increase the Health emergency amount to 10 -15 Lakhs Min. which should be easily acessible 

You can make Money Multiplier FD [ICICI it is called like that ](Different than from actual FD) so that when you need at some case automatically when you swipe yur debit card it comes into the account . sometimes we don't have time to break the FD in case of real emergency

Normal FD we may need to break it online and then we get that 

I say never ever touch this above money[As of now 5 Year FD is good enough , Next 2 years mostly interest rates will be in this range] , Later once rates improve you can make it again cancelling at that time for longer lock in . 

2. As you are pensioners we get pension but there is a possibility our expenses Year ON Year increase(Because of general price increase) . So you can build Additional cushion of lets say your expenses are 4 lakhs per annum and it is covered by your pension right now . Have a little bit of income stream 2Lakhs per annum [Apart from pension]  for next 10 years.

Options available:

1. SCSS [Post office agents can help or Banks like PSU , icici also should help you to do this ] you might already have this

2. PMVVY {Specially designed for seniors] lic website straight buy . no need to go to any agent.

3. GOI Floating rate bonds - Higher rate than NSC  [I need to see how you can buy

4. NSC from post office 

You can invest on Products like Senior citizen savings scheme - 5 year maturity (Upto 30Lakhs [15 Lakhs in you as first holder and spouse as second holder] and Vice Versa) , PMVVY [Online you can buy]  - [30 Lakhs] [10 Yr Product] (LIC Fixed interest: 7.4 %) 

This both should fetch you around 4 Lakhs income stream for first 5 years and after that you can extend the SCSS for next 5 years . 

These products you can very well liquidate in case you need with a very small penalty . Govt backed up schemes. Protection of capital.

In case you have more requirement you can make use of this also GOI Floating rate bonds

Now comes the part your emergency is taken care of , your annual cushion amount is also taken care in case expenses increase. 

IN case of any short term goals apart from this you got to save accordingly 

I am not saying right away liquidate all high interest earning fixed deposits to above. if you remember this framework you can make your decision of renewal accordingly to the above in the time of maturity. 

Above all options in tax treatment it is exactly the same as FD but it earns 1-2 % points more . 

Now coming to the surplus generated every year apart from your expenses and cushion amount which we generated how to manage. 

I assume a part of surplus generated you can make Year on Year NSC in post office or keep rolling over to above 3 Products so that your life time expenses are taken care throughout the lifetime 

  [Income ]  

Pension + Surplus

[Consumption]

Expenses 

Invest for your future self (apart from having 10 year cushion keep rolling over every year)

Invest and give it as inheritance to the next generation 

Now we are talking about investing and giving as inheritance :

Once we finish off the above things we can come here 

1. Longer the tenure it is better

2. Asset allocation (Having diff assets protect us during diff times; Not all asset classes increase at same time )

We got to build a portfolio [We come inside this with a very long term horizon] 

Portfolio Should consist of different asset classes

Below portfolio seems to have a limited drawdown and less volatile and inflation beating returns in long term (You could to plan it close to Multiple decades for this and should not see returns every now and then )

(Equity ) : (Debt) : (Gold) : (Liquid Funds)

This is called the all weather portfolio. 

Assume 1,00,000 you are planning to invest every year .

Equity: 25000

Debt : 25000

Gold: in case u already have leave this 

Cash : 50000

Gold : Gold we already have gold coins. and we will have some gold which we bought for our consumption and lets not put more money in this passive metal.

In my opinion whenever a crisis comes and money value erodes people move to gold as a safe haven . there are avenues like gold funds which you can buy which will be easy to liquidate

Gold as an asset is as volatile like all the asset . We cant call an asset class would never fall.

Equity: We won't be buying stocks directly as we don't have time to track all this. So index funds are a good choice [This fund will invest in a set of stocks ]

Volatile in the Shorter term , Better returns as the economy picks up and in the longer term.

Equity component can be compensated by Investing in Passive Index Funds which are low cost and give average equity returns in the longer term.

Cash : Liquid Funds which invest in the bonds of AAA rated companies /Soverign gurantee Govt bonds. 

Debt : Debt funds like Ultra short term funds which invest in AAA bonds  

We will talk about the product selection after you read this  .