Making the Right Investment in the Age of Covid – The New Indian Express
Express press service
The cryptocurrency market is booming. Last week Bitcoin, Ethereum, Dogecoin and others lost more than 15% in value. There are days billionaire Elon Musk approves them, then days he retires. Many transactions in these new assets are volatile. Investors who are making money from these assets in a panic may be buying stocks or gold. Last week, stock markets around the world saw a sharp rise. Gold prices have also gained ground.
The factors influencing financial markets around the world are no longer tied to interest rates or corporate earnings. It’s more about moving money from one asset class to another. There are two groups of investors. The only set is from those who know a lot. They have access to the most recent information on the world’s major economies and markets. They are on top of market cycles and focus on asset allocation based on informed decisions. Institutional investors and high net worth individuals fall into this category.
The other group of investors are people like you and me. You can’t claim to know a lot. At the same time, you have access to information, but your preoccupation with the job relatively limits your ability to connect the dots. The current turmoil in the financial markets is driven by investors who know a lot. They have looked at several asset classes like bitcoin, and some of them are taking profits or looking to diversify their portfolios.
Diversify the risk
At all levels, risk diversification is important. You may be an investor with the most risk appetite in the world. You can have access to the latest information and data needed to manage your money. Even then, it is impossible to eliminate the risk. You can only minimize it in your lifetime by using your common sense.
The age-old saying “Never put all the eggs in one basket” works. This is the best way to protect your wealth. If this applies to a sophisticated investor, it also applies to you. There would be temptations in your life. The value of Bitcoins has risen from a few hundred to $ 30,000 in just a few years. However, not everyone can make a fortune and get a multi-bagger instantly. You have to be in the game for a long time to grab your opportunity at any given time.
Fixed deposit and other safe assets
Your safe assets include cash in banks, term deposits, money put into the public provident fund, Kisan Vikas Patra, and other government post office programs. The government has put in place a mechanism to determine the rates offered on these instruments. According to the latest RBI bulletin, the rates currently offered on these plans are higher than the formula created on the basis of market-linked interest rates.
This means that the government bears the difference of up to 1.5%. This is the difference between the rate administered on these plans and the market rate. Given that the Indian economy is expected to underperform and experience declining tax revenues, the government will likely view this difference as a burden. These rates could also drop if the lockdowns are lifted and the economy does not grow at the desired pace. You need to think about diversifying returns below inflation rates.
Your money can only grow in stocks for the long term. Your investment must beat the rate of inflation. Systematic investment plans in exchange traded funds or diversified mutual funds are your gateway. The National Pension Scheme or the NPS offers market-linked returns. It would be helpful if you could take advantage of the additional tax benefits of the NPS and the equity returns.
When it comes to equity, the motivation of companies is to grow their income and profits. Stock prices follow earnings growth. You need to ensure an adequate allocation to equity from your monthly surplus. If you’re looking for a good time to start, you might meet with a financial advisor right away. There is no right or wrong time to start investing for the long term. While excessive allocation to equity assets is risky, so is inadequate ownership of equity assets.
(The author is editor-in-chief at www.moneyminute.in)