Retirees are risk-averse investors whose needs differ from individuals at their younger age, but it does not mean they are obligated to invest in uninspiring assets that cannot beat inflation. Many retirees look at numerous opportunities available in the stock market by following effective share trading strategies. Such strategies help them hedge against inflation and fill their income gap during retirement.
You need your demat account and a trading account to invest in the stock market. A discount broker offers a free trading account and demat account with a subscription-based brokerage plan.
What is a Demat account?
A Demat account is an online repository to hold the investments safely electronically. A demat account is the entry gate to the stock market. It is mandatory for every individual to invest in the stock market as per the rules of the Securities exchange board of India (SEBI) for online trading. Your demat account can secure your shares, mutual funds, bonds, government securities, or other money-market instruments. It is the primary account for investors. Hope you got the answer to what is Demat account.
What is a trading account?
A trading account is simply an account that connects you with the stock exchange to buy or sell financial securities. The stockbroker allows the traders to access its trading platform to connect them to the exchange and choose to trade the right securities at the right time following strategies. It is the primary account for active traders.
Here are the effective investment strategies and considerations for retirees.
The Strategy
An equity-based portfolio can offer high returns that involve high risk due to the volatile markets. But retirees may not have tolerance for such losses. Therefore, they need to segment their savings into investing, trading, and speculation.
Investing
Investing covers a major part of a retiree’s portfolio. You can allocate at least 75% to the long term investments. These investments should be per the total return investment approach. Retirees have unique liquidity and capital preservation requirements. Their investment portfolio should be met through their investments which is possible with a total return investment strategy based on well-diversified investments. Their portfolio consists of equities, growth funds, debt instruments and fixed income instruments also to ensure capital preservation and offer inflation-adjusted returns.
- Stocks to consider: Since retirees have low-risk tolerance, they can invest in strong large-cap companies. They can pick a few outperforming stocks in the market. Quality company management supports the blue-chip stocks of large-cap companies. These stocks will not be affected much by market fluctuations. These stocks can provide you with high dividends in these investments. Investors should look at the growth history of the company.
- Sectors to consider: Retirees can consider investing in defensive stocks that can provide regular dividends. These stocks are the stocks of the company whose products keep in demand always, such as pharma companies, Information technology companies, Fast Moving Consumer Goods (FMCG), etc. With the hope of regular and stable dividends, the retiree’s investment portfolio consists of such sectoral investments.
Trading
- As per experts, retirees can reserve 20% of their available funds for active trading. They can buy securities at low and sell them high. To make quick and small profits, retirees can consider liquid stocks that can facilitate easy exit using a stop-loss strategy. With a trading strategy, you may have an urge to wait for more to sell securities at high prices. It helps you to stay away from emotions while making trading decisions.
Speculation
- Retirees may not have a high-risk appetite, but they can assign a small portion to speculative stocks if they want to. These are the stocks with a high potential of providing the highest rewards but to traders with a high-risk profile. Retirees can allocate a maximum of 5% to speculative ideas. Therefore, it is the category to trade actively with the money that you can afford to lose.
This way, retirees can have a stream of regular income for financial support and fulfill their lifestyle requirements. Invest and trade in the stock market to gain significant profits based on strategic decisions.
Trading Time
The stock exchanges, BSE and NSE, close their operations at 3.45 PM and re-open at 9 AM the next trading day. The after-hours trading duration is 3:45 PM to 8:59 AM for the equity segment and 3:45 PM to 9:10 AM for derivatives such as future and options.
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