Different Types Of Investment Opportunities

 

Every day brings a new twist to the sentiment of Indian investors. If one day the stock market is up 500 points, the next day, it is down by nearly the same amount or even more! Doesn’t this confuse you? Not only this, there are a number of aspects that would be on your mind.

Some of these are –

• The equity market has gone nowhere in the last 5 or 6 years. Even long term investors are losing patience and starting to question the usefulness of equities.
• Gold prices have had wild swings much to the dismay of the average Indian investor who always believed in gold as the “safest” investment.
• Debt mutual funds’ performance took a sudden nasty turn just when investors had loaded up on long term funds in anticipation of the interest rates sliding. This has shaken investor confidence.
• On top of all these woes, investors had to contend with Ponzi schemes and blatant frauds in the commodities spot market.
• Real estate prices have remained unaffordable and even unbelievable in some cases putting them out of the average investors’ reach.

Well, investors are having it tough no doubt. It’s a storm out there with literally no place to hide.

Sticking to investment fundamentals

As with everything else in life, investments too will have their ups and downs. It is the reality after all. There will be good periods and also the bad ones. In this scenario, using a sensible approach is the only way out. Disciplined savings habit, wise investments with adequate diversification and a clearly defined asset allocation pattern based on a financial plan aren’t just bookish gyan to be brushed aside. Just as sound technique is essential for success in cricket, a strong commitment to fundamentals is the secret of investment success.

Investment opportunities

Here are some attractive investment opportunities that you can consider at this point in time.

1. Fixed Maturity Plans (FMP):

   When everyone expected interest rates to fall, it surprisingly rose! This has given an unexpected but excellent investment opportunity. Since interest rates are considered to be at or near the peak now, this is a good opportunity to lock into these attractive rates through FMP. As FMPs have a fixed maturity date, invest for the full tenure of the FMP; this will help you get the prevailing high interest rate for the term of the fund. Depending on your investment horizon, you may choose FMPs with tenure of up to 5 years.

2. Short term funds:

   Bond funds come in a variety of investment terms. There are long term and short term funds depending on the tenure of the bonds that they hold. As short term interest rates spiked recently in response to the RBI measures to stabilize the rupee value, short term mutual funds have been offering attractive returns. Since low tenure bonds and funds experience lower volatility due to interest rate movements, these are good options for a 12 to 18 month investment period.

3. Long term funds:

   Bond funds that invest in relatively longer term bonds would benefit tremendously when interest rates fall. The current high interest rates are expected to fall in the near to medium term. By investing in these long term funds, you not only get higher interest but also an attractive capital gain when interest rates start falling (market prices of bonds rise when interest rates fall). If you can remain invested for more than 3 years and are comfortable with short term price falls and rises, you can consider these funds

4. Equity SIP:

   Most successful equity investors invested when everybody preferred to stay away from equity. There is very little enthusiasm for equity shares among investors now and hence their prices are at an attractive low. By investing regularly in equity funds now, you have the potential to earn attractive returns when the market does turn around eventually in the near future. Systematic Investment Plans are an automated way of investing a fixed sum at fixed time intervals. All it takes is a standing instruction to your bank through the mutual funds scheme and your money would start flowing into the scheme without any further effort. Investing bit by bit through this period of gloom, you not only reduce your investment risk but also enhance your return potential. You may start and more importantly, continue an SIP in a good equity fund.

To conclude, don’t despair! There will always be some investment avenues that would make sense in a given situation. Happy investing!