The New Year always holds infinite promises. But it also brings its share of concerns. You never know how the year may unfold; how the events will impact your life. Most importantly, you never know how you may fare financially. Will you get the bumper bonus this year, too? Will you make 50% returns on your equity investment? Will the real estate prices come crashing this year? Questions abound. Here is an attempt to find out how your finances would be this year. Sure, a New Year as such, doesnâ€™t have anything to do with your savings or investment. It is big events like the Budget or Reserve Bank of Indiaâ€™s policy measures that would decide your fate. Let us do some crystal ball gazing to find out what the year holds or you.
Nevertheless, hereâ€™s a word of advice from an investment expert: People should look beyond conventional avenues like public provident fund. After care of your Employee Provident Fund and life insurance cover, invest the rest of the money in a tax saving scheme with a mutual fund. You are likely to get superior returns from these schemes. The lock-in period is also short (three years) and donâ€™t have to pay any taxes on the returns.
Fixed Deposits and Debt investments
Here is some happy news investors may see interest rate on bank deposits going up this year. A series of monetary measures taken by the RBI this year has already started pushing up the interest rates. Experts believe the rates may further climb up this year.
In order to make the most of it, try to park funds in short term deposits. If you are investing indebt mutual fund schemes, opt for fixed maturity plans (FMP), short term funds and liquid funds. FMP are ideal for those who donâ€™t want to take any interest rate risk.
Avoid long term debt schemes because their poor running is likely to continue as the interest rates look ready to climb up.
According to investment experts, however, if you are looking to buy a home to stay, you could still go ahead and buy. The first home, they say is a necessity and price may even out in the long run.
So, what should be the investment strategy this year? Let us first look at mutual fund investors. Investors can keep the company of diversified equity funds and infrastructure funds. Investors can expect decent, but not bumper returns, from diversified and infrastructure funds this year. Infrastructure is the focus area and the sector is likely to do well.
For investors investing directly in stocks they must remember that the market has made substantial gains in the last one year. It will be difficult time making money this year. Look at stocks very carefully before investing, as further movement would be very stock specific. Investors should also keep in mind that every fall in the market wouldnâ€™t be an ideal time to buy stocks and one must not fall for fads in the market.
According to experts, investors should be prepared to face a lot of volatility in the market this year and they shouldnâ€™t panic at every day movement.
Investors should curb their temptation to churn their portfolio much. The market is likely to be very volatile and an investor wouldnâ€™t be able to time it right.
New Investment opportunities
Investors may have new investing avenues in the New Year 2007 and the possibility is the year may see the introduction of real estate and exchange traded gold funds. This would be an exciting year for mutual fund customers as they would see a lot of product innovation this year. Investors can use these products to diversify their portfolio.