Diwali 2018: From equities and gold to fixed income instruments like FDs as well as mutual funds, there are options galore which can increase wealth.
Diwali, the festival of lights, is considered an auspicious occasion for making money. It is generally believed that any investment made during the Diwali period can provide better returns. From equities and gold to fixed income instruments like fixed deposits (FDs) and recurring deposits (RDs) as well as mutual funds – there are options galore which can increase your wealth. Financial experts suggest that it is always better to invest with a long-term perspective. Wealth-creation is a long-term process which requires control over short-term temperament, with a proper commitment to achieve financial goals, they say.
How should you plan your investment?
You should always gauge your risk-appetite before investing, said Brijesh Parnami, Executive Director and CEO, Essel Wealth Services. “It is advisable to plot a detailed framework of one’s current financial situation before going for any kind of investment. One should take into consideration his/ her goals and most importantly, evaluate the level of risk appetite that he/she has,” Mr Parnami told NDTV.
Age and contingency planning are other factors should be considered before choosing an investment option. Taking help of financial advisors is always better as they impart proper knowledge of financial instruments and also help in switching funds as per market conditions.
Anil Rego, CEO and Founder, Right Horizons suggests going for a diverse portfolio. “Make an investment plan that is anchored to asset allocation principles. Remember, no particular asset-be it stocks, gold, debt or cash will out-perform in all conditions. That’s why a portfolio with diversified styles is required,” he said.
“Don’t construct a portfolio based on recent performance or on a bull or bear market. Once you follow an asset allocation model, up and down moves in the market do not matter much. Decide how much you should have in the chosen assets and let the mix work up the magic. By next Diwali i.e. 2019, you would be doing much better than others if you follow asset allocation,” Mr Rego added.
Here are 10 investments options that you can try ahead of Diwali 2018:
1. Gold and gold-related investments: Gold is a common investment for Diwali and Dhanteras. Traditionally, gold has been a hedge. So, some purchase of gold is warranted in the portfolio. “Seeing the rising gold prices due to festive demand, it is suitable to have 10-15 per cent allocation given towards gold or gold funds,” said Dinesh Rohira, Founder and CEO at 5nance.com. “Gold provides diversification because of low correlation with other asset classes”, said Vijay Kuppa, Co-Founder, Orowealth.
Aditya Maru, Founder and CEO, Augain Wealth Management Private Limited, said “Instead of buying physical gold, one can also buy gold in electronic form (GOLDBEES) which is liquid in nature and can be sold instantly on the exchange.” Gold bonds are also a good investment option. It pays a fixed interest plus capital appreciation opportunity linked to the gold’s price movement.
2. Fixed deposits (FDs): Bank fixed deposits (FDs) are secure investment instruments that offer higher interest rates than deposits in savings accounts. FDs can help you meet short-term liquidity needs. FD accounts can be started for a specific period, which can be as short as seven days.
3. Recurring Deposits (RDs): Recurring Deposit is a product that provides an opportunity to build savings through regular monthly deposits of fixed sum over a period of time. RDs help customers build on their savings in small, regular pay-outs.
4. Investment in equities: Investing in stock markets should only be done with a long-term time horizon and not for trading purposes. “Equity markets look like a good place to make some bets with a 3-5 year horizon. Consumption-oriented stocks in midcaps look attractive. Avoid debt-ridden stocks and cyclical plays. Domestic consumption is a multi-year theme and any company that has the potential to tap urban, as well as rural ‘Bharat’, should do well,” suggested Mr Rego.
“Stocks in the corporate banking segment, pharmaceuticals and select consumer stocks might also do well in the next one year,” said Prasanna Pathak, Fund Manager-Equity, Taurus Mutual Fund.
5. Mutual funds (MFs): The best idea is to pick up a few diversified mutual funds and invest in them, explains Mr Parmani. “MFs take care of the fund performance. It helps wealth to grow and provides liquidity option during times of need. Investors can invest in different types of mutual funds based on their goal requirements and risk appetite,” he said.
6. Systematic Investment Plans (SIPs): This Diwali, you may also try investments through the Systematic Investment Plan (SIP) route in diversified equity mutual funds for long-term wealth creation. SIP is a method of investing a fixed sum regularly in a mutual fund scheme. It allows an investor to buy units regularly on a specific date of the month. The SIP may not be very appealing initially but with time, the investment can grow multi-fold. “Suppose if you start a SIP of Rs. 5,000 per month for a 5-year old child in equity fund yielding an annual rate of 15 per cent, it will accumulate about Rs. 22.3 lakh when your child turns 18,” explained Mr Rohira.
SIP can also serve as one of the best financial gifts to be given to a loved one for Diwali, experts suggest. “You can start an SIP in your loved one’s name. It will not only multiply the value of gifts given, but will also serve as a good financial education so that your loved ones start becoming prudent investors in the years to come,” said Raghvendra Nath (CFA), Managing Director, Ladderup Wealth Management Private Ltd.
7. Exchange-traded funds (ETFs): ETFs are are similar to mutual funds but trade like stocks. They offers investors the ability to diversify over an entire sector or market segment in a single investment.
8. Real estate: Real estate may also turn out to be a stable investment which could give higher returns in the long run due to its cyclical nature, suggested Mr Parnami.
9. Public Provident Fund (PPF):PPF is a long-term investment scheme which comes under the exempt, exempt, exempt (EEE) status. The maturity amount and the overall interest earned during the period of investment is tax-free. It has a lock-in period of 15 years. For the quarter ending December, PPF investments will fetch an annual return of 8 per cent.
10. Monthly income scheme OR (MIS) account: Post office monthly income scheme account can be opened by cash or cheque, said India Post. For the quarter ending December, post office MIS account offers an annual return of 7.3 per cent. The interest on post office MIS account is payable monthly. The minimum amount required to set up a monthly income account is Rs. 1,500. The maximum investment limit is Rs. 4.5 lakh in single account and Rs. 9 lakh in a joint account, according to indiapost.gov.in.