Equity market has not given any returns in last 5 or 6 years rather traders lost money due to frequent swings. Even long term investors are losing patience and started exiting even with losses in their portfolio. Steady upside move of Gold prices also got lost in past few months with steep correction in international markets and topsy turvy currency. Even Debt funds’ performance took a sudden nasty turn just when investors put their money on long term funds in anticipation of the interest rates sliding. This has shaken investor confidence.
And on the top of all these woes, investors had to go through Ponzi schemes and defaulting exchange in the commodities spot market. Few investor turn their faces towards real estate market, which is also now facing the issue of unaffordability, lack of liquidity and falling prices in certain markets.
Hmmmm…a difficult times for investing. And with inflation remaining at higher levels, you can’t even keep your money uninvested. So which way to go !!!
Well all of us should stick to investment basics and must remember fundamentals. Ups and downs is the nature of economy and thus financial markets. Their is a cycle of good period and bad period. In these difficult times, stick to your saving discipline and invest with adequate diversification. A clearly defined asset allocation based on your financial plan needs to be drawn and if already drawn earlier then need to strictly follow. Commitment to follow fundamentals of investing always pays in longer term.
Let us look at some of the Investment opportunities that may be considered
1.Fixed Maturity Plans (FMP): When everyone expected interest rates to fall, astonishingly it rose! This has become a great opportunity for investment. As interest rates are considered to be at the higher levels now, it is a good time to lock into these attractive rates through FMP. As FMPs have a fixed maturity date, thus you may invest upto 5 years, depending on your investment horizon, and get the prevailing high interest rate for the term of the fund.
2. Corporate fixed deposits or NCD : Various corporates are aproaching markets to attarct investors with higher rate bearing fixed deposit or Non convertible debentures (NCDs). NCDs are also traded on the exchange and thus may be liquidated at any point of time. As such, you will be able to lock in higher interest rate to your investment amount for the tenure of FD or NCD.
3. Do not stop your Equity SIP: Good times, bad times, up market, down market, do not stop your SIP. Even follow the date discipline. SIP always averages out all such market fluctuations and aggregates a large corpus for your future. A regular SIP also gives a reasonable to good returns in a long term. Systematic Investment Plans is termed for investing a speified sum of money at regular intervals. You may also automate this process by providing a standing instruction to your bank through the mutual funds. As such an automatic investment will start flowing from your bank account into the selected mutual fund scheme.
4. Be regular with your PPF account : PPf now allows an amount of Rs. 1 lac investment every year for every individual. It offers interest rate of 8.7% and that too tax free. So keep depositing regular cheques to your PPF account.
5.Long term Bond funds: Bond funds that invest in relatively longer term bonds would be a big beneficiary when interest rates will fall. With complusion to provide growth to the economy, the current high interest rates are likely to fall in medium to slightly long term. When interest rates fall, the prices of these long term bonds rise thus providing a capital gains. Thus by investing in these long term funds, what you get higher interest along with an attractive capital gain as and when interest rates start falling. If you may Keep investments for more than 2-3 years and does not get worried with fall/rise in short term price, you may consider these funds.
6. Real estate : Definitely, it is for investors with large corpus of funds. Small investors with limited capital or uncertainity about earning should avoid. Large investors may look for good returns in real estate in medium to slightly long terms i.e. only when interest rate will fall. So blocking your liquidity now on very selective projects may bring in windfall gains. Realtors are offering good discounts and attractive schemes like 12% assured return, etc however looking at the location, builder reputation and other project details is most important. Be highly selective and negotiate well.
Happy investing!!!
