What should be your investment strategy in such volatile markets?
The Indian financial markets markets is going among the most volatile phases it has witnessed over the past many years post Lehman, Merrill Lynch crisis. Whether it is equity, metal, currency, oil, every new morning brings with it fear and hope of a new event overnite (especially in US markets).
Many analysts believe that the Indian growth story is still very well intact while on the other hand, many still does not rule out the possibility of Sensex going sub 10K levels since the pain in international markets is still not over.
My call is that those investors who have burnt fingers in the market fall and have seen their wealth erode quite badly should stay away and wait for a market upward movement and liquidate their holdings even if they are not earning profit inorder to have that all important cash in their portfolio.
Those who have excess cash at their disposal could consider investing a portion of it at different levels even in case of an upmove or downmove, so as to average out their costs.
Its also best to bring in a sound sense of asset allocation, as by RBI voices it seems that interest rates have peaked, investments in Bank FD or FMP are considered a wise option. The interest rates at this moment are among the best returns which one could get in recent times.
For those who do not wish to directly invest in equity, consider equity mutual funds which are diversified rather than taking a sectoral call on IT, pharma, banking orcapital goods.
Tax-saving funds should be considered only if one has not claimed deduction u/s 80C upto limit of Rs.1 lac as these funds have a lock in period of 3 years. Otherwise consider investing in PPF to a limit of Rs.70000 as it is still the only tax-free interest bearing instrument having government security.
For a long term investor, one can consider investing in balanced funds too as it would help it to take advantage of both equity and debt markets over a cyclical period while for a medium term horizon equity fund with an SIP option is prudent decision.
For choosing mutual funds, check out websites like valuresearchonline.com, easymf.com and mutualfundsindia.com and choose among range of funds taking into account the fund house performance, asset size, investment strategy, portfolio and star ratings (I personally look at star ratings and asset size of the fund).
One can even take some exposure in Gold ETFs for bringing some stability and diversifying risks.
Real estate should be a big no-no atleast till December 2008.
Amit Agarwal
Google Developer Expert, Google Cloud Champion
Amit Agarwal is a Google Developer Expert in Google Workspace and Google Apps Script. He holds an engineering degree in Computer Science (I.I.T.) and is the first professional blogger in India.
Amit has developed several popular Google add-ons including Mail Merge for Gmail and Document Studio. Read more on Lifehacker and YourStory