Equity investments at 50! – Should you opt for it?

By Sheshadri | February 22, 2015



When the markets are booming, everyone wants to ride the Equity Bull to get a pie out of it and take a quick return out of the market. It may be a fresh graduate out of college or a senior citizen at 60. Before we start analyzing the markets let’s start with the story of a pessimist.

While I was in my bank for some banking transaction, I overheard the conversation between a business tycoon around the age of 60 and a fresh MBA grad, who is marketing banks products and services to the HNI fraternity. The guy started explaining a couple of products and told the businessman, Sir ji I have an excellent NFO (Equity NFO – 3 years close ended) lined up, and you can expect X % returns in 3 years. Businessman told, “beta this option is good enough for someone who is looking for that time duration, with my age I don’t even buy green bananas, so please skip this and tell something else which suites my requirement”. If we look at a 60 year old optimist, he would say, Dude am just 20 years with 40 years of experience with me.

Investments vary from person to person, situation to situation, timeline matters and personalization is the key for successful investment planning and long term wealth creation (long term varies from person to person, for many traders long term is up to 3:30 pm, for some up to last Thursday of every month and few its measured in decades)

Over the years I have heard saying, if your age is 50, you should not have exposure of more than 30% into equities. All those formulae appears useless under various situations (with all due respects to those who created and who uses it). Let not a dumb formula decide on where someone invests without even looking at his risk appetite.

Let’s try to figure it out using an example.

If a person, say Mr. X, who is 60 year old has an expenditure of 40000 INR and his passive income (interest from FD’s, tax free dividends, rent from real estate or royalty) is 60000 INR, gets a cash of 2500000 INR and he want to invest this with a time horizon of 15 years, what stops him in investing in equities to the tune of 100% of this corpus?

If we take the 10 year historical returns of equities (indices of India), most of the times it has handsomely beaten the returns of other asset classes including gold and real estate. What we are seeing in gold price fall can be considered as a buying opportunity or it may be a futile attempt in trying to catch the falling knife.

When we talk about equities, it’s not only buying direct stocks or indices; one can take exposure into equities using various other options like:

1)      Investing in mutual funds – Hybrid, MIP, Index Fund, Sector Fund

2)      Investing in index futures

3)      Investing in stock futures or buying equities in cash market

4)      Using options to either hedge the existing portfolio or to create a low risk portfolio when compared to direct equities or futures

5)      International equities if the goal is abroad (child’s higher education abroad)

One should consider investing into equities to whatever the percentage of allocation their risk appetite allows them, or how crucial is the goal for which they are planning to invest. No sane person will suggest someone to invest in equities for a goal which is 12 to 18 months near and goal as crucial as child’s education or some planned hospitalization / operation. If the goal is little far (atleast 5 years plus) and the expected rate of return to achieve the goal is way above normal FD or Debt rates then equity makes all the sense. Gold should be taken as a investment avenue only as a hedge against inflation.

The advantage for a 60 year old person is he can try to leverage his free time (if he is retired) and his rich experience that he would have accumulated over the decades. Just thinking as a consumer one can think of buying (owing a small part of) Britannia (who doesn’t know what they sell), colgate (I brush daily), Gilette (India has 30 crore + population who are aged less than 20 years), SBI (who don’t want to open an account with them / who don’t want to avail a loan from them).

Start reaping benefits out of the Biggest Bull run in India that’s still in the making.


The above views are generic in nature and it cannot be treated as a recommendation to buy or hold any stocks.




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Category: Asset management Equity Instruments Money Management

About Sheshadri .N

Sheshadri N, an avid equity enthusiast since 2005 and an ex banker, have witnessed the ups and downs of the market first hand, had tried to tame the bull, beat the bear and go with the deer. He is a Mechanical Engineer and an MBA in Finance, also doing Masters in Business Law, with numerous certifications from NSE & other market related intermediaries.

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