Should I continue with my investments the way I am doing?
Should I shift from equity investments to debt investments?
What changes should I make to my investment strategy?
Should I get out of the market until the election?
Being a careful investor, if you are also concerned about market instability during elections, you are not alone. The market will remain volatile till the general election outcome is confirmed – a common fact which doesn’t need further proof. In fact, stock markets have already been volatile over the past few weeks, driven by domestic and global concerns including state elections, movement of rupee, crude oil, etc. In line with this, investors often worry whether they should wait for the general election to get over before they invest.
“A minority government has not necessarily been bad for stocks. Eventually, stocks respond to growth and inflation – economic metrics that are a function of policy choices and global factors. This time, however, the market enters the 2019 polls with a majority government already at the helm, so it has to deal with the prospects of a weaker government at the center,” – Morgan Stanley.
Amidst all these financial hustle and bustle, how a smart should deal with investment? What is the safest bet? Let us find out what financial gurus suggest.
The smartest way would be to rely on those investment options that are not affected by the market. So, the options are:
Unit-Linked Insurance Plans – a product which is a combination of insurance and investment. They are one of the most trusted investment options which not only enable you to leverage the power of the stock market but also offer life insurance. As they are typically purchased to fulfill long-term financial goals, like child’s education and so on, they are not affected much by the market. The returns may not be as lucrative as mutual funds, but they come with a lock-in period and guarantees safe return. Other perks of ULIPs are:
- Policy term options
- Tax benefits
- Options to choose among multiple funds
- Guaranteed benefits in case of loss of life
It is an ideal option if you want to provide your loved ones with a secure and comfortable life, today as well as tomorrow. ULIP plans give you peace of mind that your family will be taken care of and provided with the same lifestyle even when you are not around.
A safe investment options, fixed deposits are for all those who are looking for timely payment of interest and principal amount. The cumulative deposits offer an interest rate to maximum 8.50% for a three-year tenure. Senior citizens, on the other hand, are offered 0.25% – 0.5% higher interest rate compared to regular deposit rates. Though the interest earned more than 10,000 a year is liable to tax, they are good for a long-term bet.
Debt Mutual Funds
If we consider mutual funds, debt funds are a safer bet as they offer good investment opportunities from medium to long-term perspective. Why are they considered safer? Debt mutual funds park their money in secure government bonds, debentures, commercial paper, etc. which inevitably make them safe. The amount you want to invest depends on your risk appetite.
Post Office Recurring Deposits
If you are looking for a secure investment option in India, post office recurring deposit can’t be left unmentioned. Trusted by a large number of families, this traditional investment option still restores its trust, even after the advent of multiple investment options. Though the interest rates have dropped recently, they are an excellent choice for investors who are looking forward to building a corpus for long-term financial goals. The major disadvantage with this alternative, which should not be overlooked, is that these deposits are taxable. So, invest them only when you have a long-term perspective in mind, preferably a minimum of 5 years. As the lock interest rates are higher, it is a great selection for the salaried class.
National Pension System
NPS or National Pension System is a long-term investment product focused on retirement. It is managed by the Pension Fund Regulatory and Development Authority. It is a mix of equity, FDs, Corporate bonds, liquid funds, and government funds. Depending on your risk appetite, you can decide the amount you want to invest in equities through NPS.
When we are talking about safe and secure investment choices, PPF deserves to be mentioned. Similar to NPS, it is also a long-term investment product that comes with a locking period of 15 years. As a result, the impact of compounding of tax-free interest is huge, especially for the later years. As the interest earned and the principal invested is backed bya sovereign guarantee, it is a safe choice.
What should be the choice for an ideal investor?
The old school style is the best to follow, i.e., don’t put all your eggs in one basket. Divide your savings in different avenues to make your financial plan failsafe. Decide an investment option after considering your financial goals. For example, if you want to secure your child’s future or education, it is advisable to opt for the right ULIP plan. However, if you want to retire comfortably, you should stock some amount through NPS or PPF.