Week Ending 19 February 2016

Dear Patrons, welcome to yet another edition of the weekend blog. As we head into the Budget, lets have a look at what happened in the market in the last week and what is in store for the coming week. Today, we will look more at basics of investment than the markets. However lets spend some time on the markets first.

As stated in the last blog, Nifty failed to hold on to 7350, which resulted in a massive sell off in the markets. Thereby creating a panic situation. As they say, whenever there is a panic situation in the market, the bottom is near. Nifty slid to 6869 and recovered in the week to close above 7200. We like to believe that the worst is over for the markets and 6869 should be the bottom for this fall of almost 2300 points or 25% on the Nifty. If 6869 is considered the bottom then Nifty assumes targets of 7300 and 7500 in near future. 

Let us now talk about investment basics.

What is an investment?

The easiest answer to this question is "anything that gives a return over a period of time is known as investment"

What are avenues of investment?

There are many avenues available for investment, namely Bank Fixed Deposits, Bullion, Real Estate, Equity, Mutual Funds etc.

Which is best investment option?

This is a tricky question, the answer to this question depends on what are our goals and what is the investible amount available with us along with the time frame. We will look one by one.

1. Bank Fixed Deposits: These are perceived to be the safest investment option. It has a drawback though. The interest rate on an FD is less than 10% in India and assuming inflation rise of around the same nature i.e. 10%, the return on FDs does not cover the inflation let alone fulfilling goals.

2. Bullion: Bullion is also a safe bet, however there are issues regarding safety and purity of the Gold that we buy. Also it is a costly affair to invest in Gold, looking at current prices. 

3. Real Estate: Again a safe investment destination, but it requires bulk investible amount and is highly illiquid.

4. Mutual Funds: Mutual Funds have not been able to generate the kind of returns one expected over a period of time and liquidity is still a concern as far MFs are concerned.

5. Equity: First and foremost, its a bit risky if done without study. Equities, however, have given best returns when we look at the 80 year performance of all the asset classes. Also Equities are liquid and there is no threat of someone stealing it. Investment in Equities can start with a small amount also.

In all the asset classes Equities have given best returns with moderate risk and hence it is the most preferred investment destination in the world.

All in all we like to reiterate our stand

Stay Invested!!!!!

P.S.: We do not consider Insurance as an investment option.