Senior citizens, equity investors worst hit
As an oil-price driven inflation rate jumps to double-digits and threatens to rise higher, senior citizens and equity investor are, and will continue to be, the worst sufferers, say financial planners.business Updated: Jun 22, 2008 20:54 IST
As an oil-price driven inflation rate jumps to double-digits and threatens to rise higher, senior citizens and equity investor are, and will continue to be, the worst sufferers, say financial planners.
Most senior citizens are risk-free and financially conservative, and consider investments in bank deposits and small savings as one of the safest venues for money earned over their working life. “But they are losing money with prices galloping (inflation) ahead of their returns,” said D Sundararajan, CEO, Trendy Investments. “This is also making it difficult for them to meet their regular expenses.”
A senior citizen, who had been earning 8 per cent from small savings schemes and 8.5-9.5 per cent from his bank deposits, is actually losing 1.5-3 percentage points due to inflation which stands at over 11 per cent. An investor must be able to earn a return at least equal to inflation. However, that is difficult in a high and rising inflationary financial climate.
Though bank deposit rates are expected to go up by a percentage point or two, they may not give enough returns for them to meet their regular expenses. Many financial planners are asking their clients planning to deposit to wait for at least 10-15 days, so that they could invest at higher rates.
Comparing the plight of senior citizens with those invested in equities since December 2007, Sundararajan said, “They have suffered notional losses (because they have not booked losses) in the recent fall, and will be in a position to recover their losses if they remain invested for a year or so. But the plight of senior citizens is insurmountable.”
Though financial planners are advising their clients to invest in equities at this juncture, many investors have lost the stomach for risk. “We are advising investors to buy now, at low levels,” said Jaya K Nagarmat, Associate Financial Planner, Investor Shoppe Consultancy. “Those who invested at its peaks and lost value are unable to do so.”
Equity investors who have invested in equities during December 2007 and January 2008 were the worst sufferers, losing half the value of their investments. “However, those who had started investing systematically since 2003 are better off,” Nagarmat said. “They have earned over 40 per cent returns during the last three years. And they in a position to continue investing systematically even though they have seen 20 per cent shaved off from their investments recently.”