2020 has been a very volatile year for the stock markets. Markets have fallen substantially compared to their highs we saw in the beginning of the year. At the same time, with RBI reducing interest rates several times, the interest on small savings schemes and fixed deposits have fallen.
Investors are thus facing a tricky situation because equity investments pose a lot of risk, while fixed income instruments are giving lower returns. FD interest rates 2020 are also on the downward side. What should be one’s investment strategy in such a situation? Let’s take a look.
Equities: With the stock markets correcting, many stocks are available at low valuations. The common idea is that this is a good time to invest in equities as the stock markets are cyclical in nature. When the markets crash, the proportion of investments in equity go down, thus disrupting one’s asset allocation. It is suggested that one invest more in equity to balance the asset allocation. However, for the retail investor, it is difficult to pick up the right stocks. Hence it is suggested that one increases one’s SIPs in equity mutual funds during 2020. However, the type of equity funds and the amount of investment would depend on the risk appetite of the investor. Investing too much into equities can be a big mistake and prudence is required.
Fixed Deposits: In times such as these, investors are concerned about the safety of their investments. Fixed deposits provide fixed returns hence the capital is protected. When you invest in a FD your money is locked in at the fixed deposit rates you have chosen. Fixed deposits also give you the option of parking your money and making it grow for a tenure that suits you. You can also invest in cumulative FD where the interest is reinvested with the principal amount. Hence investing in fixed deposits is one of the best investment strategies in 2020. However, FD interest rates 2020 have been falling recently and are expected to fall even further. In such a situation, it makes sense to invest in company FDs which offer a higher interest rate. Among the list of company FDs, Bajaj Finance offers fixed deposit rates high as 7.85 per cent which is higher than that offered by banks. However, even as Bajaj Finance FD offers higher interest rates, it is rated high on stability and safety with ICRA’s MAAA (stable) rating and CRISIL’s FAA/Stable rating. Hence your investment is never at risk even as you enjoy high fixed deposit rates on your investments.
Gold: Another good investment strategy is to invest a portion of your portfolio in gold. With the world witnessing low interest rates, the yellow metal provides an attractive option to park excess funds. God is normally used to hedge against economic uncertainty and adds a layer of safety to your portfolio. Also since the supply of gold has been low, the long term prices of gold are expected to stay buoyant. There are different ways of investing in gold. While buying jewellery and gold coins are an option, one can also invest in gold savings schemes. Investing in gold ETFs are however, the most cost-efficient way of investing in the yellow metal. By investing in gold through route you do not pay any making charges and also do not need to worry about security.