Finding the right platform to invest is a major challenge. The bullish trends in global equity markets and sliding interest rates make any investment decision all the more difficult. Yet there is a time-tested way you could rely in 2020 too!
The secret is the wise allocation of resources on the basis of precise planning. Your investment journey starts with the allocation of assets by considering your financial goals and your ability to handle risks. The strategy could work out different from investor to investor. So you have to devise a custom-made plan for yourself. Yet we all can agree on general trends awaiting us in the new year.
Equities
Equities is always more rewarding than the other instruments of investment in the long run. That makes equities an integral part in any investment portfolio. You have to be careful in picking your stocks.
The Indian markets are witnessing a massive polarisation of valuation. When Nifty soared to an all-time record, it was led by just 10 or 15 stocks. Just categorise the top earning 15 stocks with the rest of the index components and a new picture emerges. While the top 15 stocks ensured returns of about 40 percent in the last two years, the other 35 stocks lost about 19 per cent of their value.
The current bull run has made the top stocks more expensive. This just points to the importance of being wise in picking your stocks. Though it is a meaningful strategy to invest in quality stocks, buying them in the current bull market comes with its own risks.
Medium stocks with good fundamentals and lower-priced big stocks are attractive at this point. You could consider buying into the stock market through mutual funds.
Mutual funds
Markets are expected to be more volatile in the current year. A reliance on mutual funds, especially SIPs, may be a safe route in that scenario. You can start investing in an SIP anytime. Multi-cap plans, large- and mid-cap plans are ideal for starting SIP investments. You can choose one of these plans as your investment option.
Large- and mid-cap plans
Mirae Asset Emerging Bluechip Fund
Sundaram Large and Mid Cap Fund
Multi Cap
Kotak Standard Multi Cap Fund
SBI Magnum Multi Cap Fund
Mid Cap
Kotak Standard Multi Cap Fund
SBI Magnum Multi Cap Fund
STPs, or Systematic Transfer Plans, are ideal for serious investors. SIP investment is better than putting all your money in tax-saving plans at the end of the year. Axis Long-Term Equity Fund and Aditya Birla Sunlife Tax Relief 96 are two plans that top this category.
Fixed-income savings
The new year could be challenging for fixed-income securities. Bank interest rates are on the wane. So investors should look for other means than plain old bank deposits. Public provident fund, with 7.9 per cent interest, is attractive and good for saving on taxes. Debt plans could also be rewarding. NCDs offered by gold loan companies in Kerala are also worth considering.
Gold
Gold goes high when equity markets tumble. Gold rose 25 per cent in 2008 when Sensex fell 52 points. In 2011, gold rose 32 per cent when the index fell 25 points. You might want to keep a part of your investment in gold in 2020. A good choice would be sovereign gold bonds and gold ETFs. Both plans track gold price with effective checks. Sovereign gold bonds are attractive with 2.5 per cent return but they are poor in terms of liquidity. They are for a term of five years. The secondary market is not reliable. Gold ETFs has a good market though.
(The writer is the chief investment strategist at Geojit Financial Services in Kochi)
