How senior citizens can invest better in mutual funds?
Mutual funds are the safest to invest for senior citizens. It provides protection of capital, tax efficiency and easy liquidation. It’s challenging to manage life in low-income sources. In the days of retirement, they want to keep their life earnings safe, while generating a promised and moderate rate of return. For such a specific requirement all investment plans are not applicable. Fixed deposits assure you for keeping your money safe but they are not taxed efficiently. If you want to keep your money safe with returns and which can be easily liquidated then the mutual fund is the best option.
Choose short term debt mutual funds
Short term debt mutual funds provide higher returns than fixed deposits and bank saving accounts. They can be classified on the basis of time period i.e., 0 to 36 months. Short term debt mutual funds invest your money in treasury bills, commercial papers, corporate debt and certificate of deposits. The maturity period of securities in a liquid fund is about 90 days while short term funds maturity period ranges from six months to four years. Liquid mutual funds are considered to be the safest fund category.
Pick equity funds
If you want to get the best 2020 medicare supplement plans invest your money for a duration of about three years or more than that, you should then invest in equity mutual funds. Equity investment has high risk. However, a period of three years or more is sufficient to recover from the market ups and downs and also earn you some returns. For best returns, you should invest small sums for a long period of time.
Liquid mutual funds offer easy withdrawal of the sum i.e., it can be redeemed in a day. There is no lock-in or exit load. Equity funds can also be redeemed at any point in time. However, if the tenure of the equity fund is less than 1 year than you have to pay an exit load of 1%. Always check for exit load before redeem.
Tax efficient earning
Mutual funds investment is tax efficient as compared to other investment options. Some equity funds are tax-free. Returns earned from equity fund held more than 1 year are tax-free.
Cost of mutual funds
Always compare the cost of mutual funds with others. Before investing consider the exit and expense ratio. Agents sell regular mutual funds including their commission which would increase your expenses. So, before investing make sure to check.