Solutions for Senior Citizens

posted on 19 January 2015 by Sunil Jhaveri

As soon as someone retires, first choice of investment is Fixed Deposits. Argument in favor of this investment vehicle is a) safety of principal & b) generation of regular cash flows. However, what the retired person fails to take into account is the impact of inflation on their principal amount & reinvestment risk (every time FD matures & gets repriced at interest rates prevailing at that time). Like currently, post rate cut (& prospective rate cuts in future) Bank FDs will be generating lower & lower returns to the investors & hence has reinvestment risk attached to it.