Financial experts usually recommend that people more than 60 years old should invest less than a fourth of their portfolio in equity instruments. But, disregarding such conventional wisdom, an increasing number of India’s older generation is riding the roller coaster of the stock markets, for higher returns on their investments.
Sixty-two-year-old Ramesh Poovaiah Chengappa, who retired as an industrial photographer and now lives in Mysore, says: “In the last five years, my equity investments have grown 200-300%. Why should I settle for a meagre 10% return on bank deposits?” Chengappa does not invest in any bank fixed deposits or bonds, and instead, has been dabbling in the stock market ever since he picked up his first scrip 30 years ago.
Adds Lovaii Navlakhi, head of the Bangalore-based wealth management firm International Money Matters Pvt. Ltd: “At a time when most 30-40-year-olds are repaying mortgages and paying insurance premiums, it is the 60-plus generation that has greater financial freedom to invest in equity, both stocks and mutual funds.”
Chengappa, a day trader, spends around six hours every day at a terminal in a neighbourhood broking house. “My equity trading now is more a habit. I do it because there is nothing else that could keep me busy.”
He picked up the ropes of equity investing from his former boss while working in Mumbai, and is very clear on what he wants to invest in: Chengappa deals only in manufacturing, infrastructure and engineering sectors, and does not own a single information technology stock.
“I like brick-and-mortar stocks and I am not impressed with ideas. I believe that companies that focus on meeting the demand of the Indian domestic markets have a stronger growth story rather than companies whose revenues are built around exports,” he says.
Zarin Akikwala, 68
Mumbai-based Zarin Akikwala’s family has been investing in stock markets and her father was a card-holding member of the Bombay Stock Exchange. Quite naturally, Akikwala too got interested in the stock markets at a very early age. “I don’t remember when I started dabbling in the stock market,” she says. I was in it probably even before I got married.”
Zarin Akikwala, 68. Photographer: Ashesh Shah/ MINT
All these years of experience in the market have given Akikwala a confidence that few enjoy. “I am very sure of one thing while investing. I am very prudent in the mix of assets in my financial portfolio. I believe that investing your money in the market is the best option, but at the same time you need to be extremely prudent about where you are putting your money,” she says. “I need a fixed income for monthly expenses. So I must have money in fixed return instruments.”
Akikwala reinvests the profits from her equity holdings into bonds, fixed deposits and equity mutual funds that provide monthly returns. Her strategy has been to enter stocks early and to hold on to them for the long term, reaping the benefits of the growth in the Sensex itself. “I now feel it is time for professionals to handle equity investments, as there are too many factors to consider,” she says. Akikwala does indulge in the odd, short-term buy-and-sell strategy based on tips from family members and friends.
“I listen to various people I come across and try to take tips from them. I think it is a good way to keep track of all that is happening in the market. For first-time investors entering the markets, I would recommend that they do it either through professionals or by investing in mutual funds,” she says.
Ramdass S. Mundkur, 80
Retired as general manager, Bharat Electronics Ltd
In 1985, when he retired as the general manager of the public sector unit Bharat Electronics Ltd, Bangalore’s Ramdas S. Mundkur, contrary to prevailing norms, used his provident fund money and gratuity to top up his equity portfolio. It consisted of blue-chip stocks such as Hindustan Unilever Ltd, ITC Ltd and construction firm Larsen and Toubro Ltd. “If I had chosen to put my meagre retirement proceeds of Rs5 lakh in bank deposits, I would not have been as financially self-reliant as I am today,” says the sprightly 80-year-old, who earns an average of 50% on his stock portfolio every year.
Ramdass S. Mundkur, 80. Photographer: Hemant Mishra/ MINT
Mundkur buys only those stocks that make it to the top 50 on the index ratings and diversifies his holdings across sectors including consumer products, pharmaceuticals, construction and infrastructure. He is not a great believer in information technology (IT) stocks and has just one IT scrip, of Infosys Technologies Ltd.
Mundkur attributes his success on the bourse to his ability to invest logically rather than be driven by sentiment. “Every time others get nervous when the market crashes due to an outside event such as 9/11 or the Iraq war, I become bold,” he says. His biggest gains have been in the aftermath of market crashes, when he picks up scrips at low prices and sells them within six months as the markets climb up, typically earning returns of 50-60%. “The only thing I worry about is the ability of the Indian economy to grow continuously at 8%,” says Mundkur, who believes equity as an asset class has benefited from robust domestic growth in the past decade. Despite his long-term view, Mundkur does indulge in short-term buying as well and sells certain scrips, his favourite being L&T, Tata Motors Ltd and Tata Steel Ltd. “I buy and sell in the short term more as a way to keep myself occupied and to sharpen my mind.”
E. Ramachandran, 75
Retired from the Indian audit and accounts department
Bangalore-based E. Ramachandran started investing in the stock markets only after he retired from the Indian audit and accounts department. Ask him who inspired him to enter the stock market at a time when most senior citizens would rather play safe with their money, and Ramachandran gives the credit to his son-in-law, Dr S. Prakash, a Pune-based orthopaedic surgeon. “I think it was a great suggestion, and I haven’t regretted my decision ever since I started dabbling in the markets in 2004-05.”
E. Ramachandran, 75. Photographer: Abhijit Bhatlekar/ MINT
But before he started, Ramachandran knew he needed to pay heed to advice from professional managers. All through his working years, Ramachandran stayed with conventional asset classes such as the public provident fund. However, once he retired, the falling interest rates and the need to reinvest rental income got him interested in the stock market. “Also, investing in equity, particularly in mutual funds, is better when you need to minimize the tax on income,” says Ramachandran.
Once he was well-versed with equity investing, Ramachandran chose a do-it-yourself strategy, by picking mutual funds based on research by him and his son-in-law. “I prefer the greater stability that mutual funds provide compared with direct stock investments,” says this septuagenarian, who normally invests with a three-year time frame in mind. His instruments of choice are mutual funds because he believes they are more stable and offer tax saving benefits, too. “I have invested about Rs5 lakh in the Senior Citizens Deposit Scheme,” he says. “The prevailing interest in the market was very low and the advantage is that you get a regular income for yourself. It is like a monthly salary.”