Investing for the future is generally something that is long-term, but that does not mean short-term gains cannot be targeted. Think of it like this — short-term gains are like bonus to long-term investments that you are supposed to be doing anyway. Which is why this special package is primarily meant to deal with where you could get the best bang for your investments over the next one year.

Some things, of course, do not change. Investment avenues, or asset classes as they are called in the world of finance, are one such — comprising shares of companies, debt or fixed- income instruments (bank fixed deposits, post office schemes), commodities (gold, silver, etc.) and property. Most certified financial planners (CFPs) will tell you that you should have a mix of these asset classes in your investment portfolio. If you are young, that is, below 30 years of age, then equity shares should definitely hog more than 50 per cent of your investments. Every five years thereafter, the equity portion of new yearly investments should be scaled down by 5-10 per cent and the debt portion correspondingly hiked.

The reason: equities are risky, but give better returns compared to other investments if you stay invested for at least six to nine years, and preferably for much longer. That way, you can encash your investment whenever you get the best value according to the price of the stock. For shorter investment periods, debt instruments are safer, because you get assured returns. “Equity markets may give you very good returns for a year, but it is not a chance I would advise my retail clients to take,” says Uday Dhoot, chief operating officer of International Money Matters, a financial advisory firm based in Bangalore catering to retail investors across the country.

Those mulling the equity option would also be bogged down by memories of the stockmarket crash of 2008 and early 2009. Alpesh Shah, a 30-year-old equity investor working in a diamond trading company in Mumbai, is one such investor. “Even now, this month’s slide in Indian and global markets is making me wary,” laments Shah.

So, it might spook you a little when we advocate equity as the option for getting best returns over the next year. But consider this: from a pure returns perspective, debt is likely to give you average returns of 7-10 per cent (see ‘Dart At Debt To Dump Risk’), and gold, the favourite crisis commodity, is also likely to give as much. Equity, on the other hand, could fetch you 15 per cent returns, or more.

SPENDING OPTIONS

Personal expenditure decisions such as buying a house or a car, spending on a marriage in the family or sending your child abroad to study can seldom be tuned to the swings in the state of the economy. Those who have to spend will do so, whether they have to beg, borrow or steal. And borrowing clearly is the best option. But even if you are desperate for money, stay away from personal loans, where interest rates are 14-20 per cent. Instead, you can borrow against securities, fixed deposits, employees provident fund account that is more than five years old, or an insurance policy. The interest rate will turn out to be at least 3-4 per cent lower. A loan against property, however, is not advocated even if you are in dire straits, in case the only house you have is the one you live in. As for property, while we believe you should wait till at least October before buying (see ‘Wait For That Bargain’, page 66), according to Dhruv Agarwala, co-founder of financial advisor and supermarket iTrust, if you want to buy a house, any time is a good time. “Do not worry about interest rates,” he says. “If they go down later, balance transfer is a good option with many banks now offering zero penalties on prepayments.” And if you are munching on the possibility of buying your first car, financial planners say the current low-interest scenario is the right time to take a car loan. But thrift is advised for those already owning their four-wheeler. “Use it till the time you can,” says Uday Dhoot, chief operating officer of International Money Matters. “Invest in an appreciating asset instead of buying a new or a bigger car.” Binu Kwatra

 
Here’s why. The day after the general election results were announced, the BSE Sensex rose 17 per cent to reach 14284 points, and by 10 June had reached a high of 15466 points. Thereafter, it began to slide ever so slightly, reaching 13400 on 13 July, and recovering to cross 14000 again on 15 July. “Typically, our equity market goes up and down three times in a year. And if you time your entry well, you can easily make 15-20 per cent returns in a year,” says Deepak Jasani, head of retail research at HDFC Securities.