The value of an investment instrument changes with time, macroeconomic developments and market movements. You need to rebalance your portfolio from time to time based on these factors.
There are various investment instruments available in the market. However, the value of these investment instruments changes with time and macroeconomic conditions. Also, it changes with investors' individual requirements.
These are some investment instruments that have a promising outlook and investors can look at increasing their allocations or adding them to their investment portfolio:
Equity
The valuations in the stock markets are no longer cheap. However, analysts believe the markets have the potential to rise further due to continued inflows from foreign institutional investors (FIIs). Investors looking at taking fresh positions in the stock markets should stick to blue-chip (or index) stocks with strong fundamentals and positively placed from a macroeconomic perspective.
Usually, large-cap stocks with sound fundamentals lead the rallies in the markets and suffer relatively lesser during the correction phases. Investors with an existing equity portfolio should review its performance and make the necessary adjustments. It is advisable for investors who do not have a deep understanding of the markets to look at investing through equity mutual funds.
Gold
Investments in gold have given quite attractive returns over the last few quarters. Speculation and the slowdown in the global developed markets have been the prime drivers of gold prices in the last few years. Historically, it has been seen that gold prices have an inverse relationship with the valuation of the US dollar in the international markets.
Investors, especially the large institutional investors, have increased their allocations to gold due to the weakness in the US dollar. Further weakness is expected in the US dollar in the short term due to various actions expected by the Federal Reserve to further stimulate the US economy. Any further weakness in the US dollar may push gold prices to the next level.
Those looking at investing in gold can buy gold bars or coins, or can buy units of gold exchange-traded funds (ETFs). Gold ETFs are very similar to mutual funds with an underlying asset being gold. Analysts believe gold prices may go through a correction after Diwali due to the absence of festival-related demand and that would be the right time to accumulate positions in gold and goldrelated instruments with a medium to long-term perspective.
Debt
Debt instruments and debt-related savings schemes are good investment options for the risk-averse investors or those looking at parking their funds for a short term. Debt instruments are more attractive after the monetary policy tightening by the Reserve Bank of India (RBI) this year. Risk-averse investors with a medium to long-term investment horizon can look at investing in bank fixed deposits or company deposits floated by blue-chip companies.
Real estate
Investing in property is another attractive option in the current market conditions. Property investments earn a regular income in the form of rent and also capital appreciation. Usually, investments in property are lowrisk with high returns. However, investments in property may not be easily liquidable.
Also, since property is a high value investment, it is important for investors to conduct proper checks and investigations first.
Tax-saving instruments
The first half of the current financial year is over and it's time to think about saving tax. This is especially so for investors who have not already planned tax. Taxes drain a significant portion of an individual's hard-earned money. Therefore, you should look at using all possible ways to save taxes (especially those in the higher tax bracket).
You can choose from a variety of investment instruments that qualify for tax rebate such as PPF, National Savings Certificate and tax saving bonds.
