The first and foremost question that comes into our mind is whether we will be left with any surplus funds to invest during the F.Y.2020-21.
Though this being an unforeseen situation which we may have never come across before. There is still a scope to plan the investments out of whatever possible we save. The decision of investment is based on two important parameters.
- To recover the losses during the period of lockdown.
- To adjust with the no or slow recovery due to economic slowdown.
- To access the expenditure in advance for the coming months.
- To have a buffer for the regular expenditure with or without accruals during the coming period.
- To ascertain additional amount of insurance premium to be paid for wither medical cover or life cover keeping in mind COVID 19.
- To have thought of some portion set aside for donation of COVID fight.
- To ascertain the minimum and maximum amount of surplus available in hand for investment after the earlier parameters.
- To ascertain the best investment option in the present situation.
The old principle of investment not having all the eggs in one basket, we have various options. These options can be decided on the basis of periodicity of the amount available, time period of requirement of funds, encashment options, easy liquidity, tax implications, security, present and future earnings projections, and mainly our own assessment about the type of investment.
- Investment in Govt. Securities like PPF, NSC, Kisan Vikas Patra, which have the double benefit of tax saving as well as earning on investment. Here I think the PPF is the best, if we need not need the invested funds for at least five years, the lock-in period for the same. The interest is tax-free and will range between 8 to 8.75%. Since the interest in always in tune with VPF, or PF the same will be near 8% always.
- LIC or Retirement Funds, here we should consider the life security instead of earnings the LIC, Retirement funds covers the Risk more than the ROI.We have to prepare a data that how much I should be secured for my life based on requirement and uncertainty of risk as well as my needs at the time of retirement.
- Gold, Gold Bonds, Gold ETF. This is the third option of investment. In our culture there is always ritual to buy gold on festivals like Akshay Tritiya, Diwali, and Dessara and so on. This is our tradition because it has easy liquidity, have maximum value in the disaster, natural calamity, war etc. We are observing this during the period of COVID 19 that the prices of Gold are increasing when all other economic indicator prices like petrol, equity, etc are declining. As such this is the best investment. I think instead of investing in gold bonds, articles, it is better to invest in Gold ETF here we are not required to invest in big amounts but we can buy ETF as per the availability of surplus funds. We can buy one, five ten, in any denominations. This ETF has also easy liquidity and will fetch approximately the same value as that of the gold as on that date. This can be better retirement planning buy 5 gold ETF each month for the period of fifteen years and the sell them after your retirement 5 each months will fetch you enough amount you require at that time.
- Invest in Bank FD/RD etc. The risk factor for investment in bank FD is higher in coming days, nobody now a day’s think your money is as safe as before ten years in the banks whether they are co operative, nationalized or private banks. The risk factor is more during the economic slowdown in the coming period due to COVID 19. It is better to invest to the extent of cover of insurance is available on the deposits. You have to be more alert to remain invested in banks; this will require visiting the branch periodically and having an overview. The interest rates will be reduced further in coming months due to COVID 19 effect on banks on account of recovery and slow demand of funds.
- Equity, shares from the market. After exercising the earlier options we may turn over eyes to the equity market. Here your own judgment is the best investment consultant you have for the investment. There is a notion in Marathi which says “Eakave Janache Karave Manache”. This is the best policy. Your decision to buy should relate to buy and forget, being the small investors we have no day to day dealing capacity and have time to know the market trends. I wonder if some say he knows how the market will behave in a particular day this is next to impossible because the market behavior is depend on number of factors known and unknown to us as well as market itself. There are three segments as per my view for investment.
- Invest in Insurance stocks. Many a times your investment in insurance stocks will fetch you more amount as insurance cover than the premium you paid for the policy. Even the uncertainty of settling the claims is not there just selling and has money.
- Invest in other stocks. Here the COVID 19 has major role to play. The pharmacy companies stocks will be attractive and may be earning stocks in near future as this is the only industry which will run in full capacity during the next COVID period. Apply your own mind in pharmacy companies and choose the stocks. The duration of this investment will be fast moving in coming three years, average thereafter and then steady. Do not choose the stocks of pharmacy companies who are dealing exclusively COVID items because as the day passes, the requirement and need may slow. Invest in those companies who have mixed verticals of COVID as well as other regular items.
- Invest in power stocks. We will observe there is only one product selling in the market during the lock down that is power. Though the demand may be slow but the they are selling at the marked up rates, if demand is reduced during lock down because of factory closed from other side the home consumption is more as people are at home. Whenever the lock down will be over the demand will be double as the companies want to increase their production and reduce the production loss during the lock down.
Emergency situations needs urgent and thoughtful actions, instead of being panic, depressed, thought on the investment, we need to convert the same in to an opportunity. This in only tentative thought line and not recommendation in any way. These are suggestions only .This note will not be taken base for the investment, better to take your own judgment while investing.