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Investment Planning – Safe, Sound and Secure

The stock market is on a down hilll trek & the sentiment is gloomy. You may be looking for better options, but there are some segments you should steer clear from at the moment
AVOIDING bad investments is as important as finding good ones. Post market crash, portfolio’s worth toady is not even a third of investments. With some genuine advise, people could have saved from investing at a wrong time. To make sure that you don’t fall into the same trap, we prepare a list of five segments you should refrain from investing in right now.

REALTY & TECH STOCKS

Stock market is a place where people with experience get money and people with money get experience. Words of wisdom, undoubtedly. But what should be your approach when it comes to where not to invest on Dalal Street? If analysts are to be believed, realty and technology sector stocks should be treated with extreme caution. The key to investing in the stock market is to avoid relying on hearsay. Given the volatility in the rupee-dollar exchange rate, investing in tech companies is a little risky. While the sub-prime crisis in the US is not directly related to performance of the Indian tech companies.

The other sector, according to analysts, where you should avoid exposure in the capital markets is realty. With execution costs of projects escalating, analysts believe that the capital intensive realty market needs more money and capital is costly at the moment. There is even a possibility of small builders folding up, which can further hurt sentiments in the sector. While this may be the right time to pick up some good value stocks, you should keep away from penny and small-cap stocks.

REAL ESTATE

The dream to own your own house is always alluring. More so now, given the slight dip in realty prices. But financial experts believe that the right time is yet to come. As a result of the liquidity crunch, further devaluation is expected in six months. Moreover, with interest rates headed north in the medium term, distress sales are expected to happen very soon. If you can be a little patient with your decision and wait for a while, the property that you are eyeing today, may get more affordable.

CRUDE OIL

Given the volatility and politics around crude prices, it is advisable that you refrain from speculative trade in it in the futures market. It is a very high risk game in today’s scenario. And with crude oil prices cracking up by almost 10%, it looks that they are headed for an intermediate downtrend. This could mean that you may end up dispensing large sums of money if you had built short positions in the futures market.

FIXED DEPOSITS

Fixed deposits (FDs) is a preferred investment vehicle for investors, especially in times when gloom descends over the equity markets. Experts, however, feel otherwise. Instead of parking funds in an FD, it is better for you to invest in Fixed Maturity Plans (FMPs), which not only guarantee fixed returns but also are highly tax efficient in comparison to fixed deposits Majority of the asset management companies (AMCs) in India offer such plans in the market.

With inflation loooking up and FD returns chargeable to tax when disbursed, forget about beating inflation your real returns are negative. This means that funds are actually eroding. Another option, feel analysts, is invest your earnings in floating rate funds. These funds are currently offering 7% returns. The returns, however, are likely to go up as they are inversely related to the stock market. Also, it is easier to withdraw money from a floating rate fund and switch to another alternative if interest rates come down.

GOLD

Gold may appear as an attractive investment bet in the current market conditions, but analysts have a different opinion. They caution that you should avoid adding the yellow metal to your portfolio. Reason: gold is positively correlated to crude oil prices, which means that any fall in crude oil prices will result in gold prices also heading south. Conservative investors, however, can still invest in Gold Exchange Traded Funds (ETFs). With interest rates going up, investing in Gold ETFs over a longer period is a more sensible decision than investing in gold itself.

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