Life after 60 is regarded as the time for relaxation and spending quality time with family and friends. Most would have saved enough to meet the financial and medical expenses. They hope that whatever wealth they have created would be good enough for their lifetime.
With due respect to senior citizens’ wisdom and financial acumen, chances are that either the person or spouse may live longer than expected. Money may have to last more than one had estimated. There is a need to keep your money growing and ensure that it outlives you.
Considering the enormous amount of volatility and lack of predictability, many senior citizens have an aversion to invest in stocks or other high yielding instruments. They perceive these to be high-risk and stick to conservative investments like bank fixed deposits.
In most cases, they succumb to advice from investment advisors, family and friends without realising that higher inflation and diminishing interest rates are going to make their gains worthless.
Legendary investor Warren Buffet, who is also a senior citizen, explains that the asset class that most people consider the ‘riskiest’ is in fact the ‘safest’. And the asset most investors consider ‘safe’ could turn out to be the ‘risky’.
He goes on to explain that the concept of ‘Cash is king’ is extremely risky as inflation ensures that you are guaranteed to lose your earnings power over a period of time. According to him, shares or rather ownership of businesses is the best hedge against inflation.
Instead of staying away from such asset classes, senior citizens could think of investing in stocks of businesses that could withstand the effects of time and inflation by virtue of their business efficiency. They could choose stocks of businesses that are conservative, dividend paying, generate free cash flows, boast of pristine balance sheet, with an upright management and a long and credible operating history. This way, one could reap the benefits of investments that could possibly beat inflation and still be in the game of quality gains.
However, no one is guaranteed to have enough money to last the rest of his/her life. No wonder Warren Buffet continues to be the richest senior citizen.
(The writer is the Executive-Director Multi Family Office division with Moat Financial Services Pvt Ltd, Kochi)
