2020 brings with it the promise of growth and opportunities. In the World Economic Situations And Prospects (WESP)’s 2019 mid-year update, it was reported that India’s economy is projected to grow at 7.1% for the fiscal year 2020, piggy-backing on strong domestic consumption and investment. With 2020 just around the corner, most people will be ruminating their investment plans. Keeping the current financial climate in check, here are some personal finance tools that one can consider to move their money, the smart and profitable way.
1. Midcap Equity Funds
A midcap fund is a special type of a mutual fund wherein the accumulated corpus is invested in small or medium-sized companies. The notable feature about these funds is that they tend to grow in size as more investors join their bandwagon.
Investment advisors are back to recommending midcap funds, and especially ones with a three-year time frame. Experts are of the opinion that several midcap valuations have been corrected, and are now economically priced. The discount in Price-Earnings ratio of midcaps to large-caps is now at a 7-year high. A short duration mutual fund scheme works as the yields are higher in comparison to a fixed deposit.
Investment experts believe approximately 10% of their investment portfolio should be reserved for Gold. They are also of the opinion that this traditional tool of investment could gain some massive returns in 2020. It is expected to rise to Rs. 41,000 – 41,500 per 10-gram level by Diwali next year. Most people consider Gold to be an obsolete form of investment. However, gold does well in volatile times and does lead to capital appreciation over a long period of time.
Unit Linked Insurance Plans come with the advantage of tax-free withdrawal, low-cost availability, structuring liquidity and ease in the switching of funds. Most insurers have now dropped premium allocation charges. Most of them are also giving back the mortality charges at maturity. Through this investment tool, investors can spread their money based on their risk capacity, enabling them to balance their portfolio. Insurers are of the opinion that with this plan, portfolio yield can surge by 200-250 bps.
4. Debt Mutual Funds
The Indian mutual fund industry has also recorded a promising performance. For the eleventh consecutive month, SIP inflows have crossed the Rs. 8,000-crore mark. As an alternative to fixed deposits, debt mutual funds can help investors with a better yield. The concentration of risk is also lower in comparison to parking a substantial amount of money for a long period of time. It’s a mandate for open-ended funds to keep the investors in the loop about the portfolio performance, helping them make an informed decision about exiting anytime at the current value of the units.
5. Public Provident Fund
Recently, the government announced that the interest rate for the small savings scheme will remain the same for the third quarter of the current financial year. This is promising news for small-time investors because most banks have been chopping the rates on their fixed deposits as the Reserve Bank of India continues to make key policy changes. With a tenure of 15 years, the impact of compounding of tax-free interest is substantial. After some requirements have been met, investors can also take loans and partially withdraw their money. Here’s everything you need to know about the PPF scheme.
Wealth creation is all about a blend. A mix between fixed-income and market-linked investments. The latter aids in generating significant returns while the former in accumulating wealth to meet one’s investment goals. It is wise to have a portfolio that contains diverse financial tools. With foreign portfolio investors turning buyers and flushing ₹2,750 crores in the secondary market and domestic investors, despite remaining sellers, bringing in ₹1,406.67 crores, the investment sector is finally getting some much-needed push.
The earnings season has also started on a positive note with companies in the IT, cement and consumer sector meeting expectations. Analysts have estimated that they don’t see any big fall for the Indian markets from the current level. All these factors indicate that 2020 is bound to be a much better year for investments in general, and with the right instruments, you can truly encash this moment.
Take this quiz to find out ‘ What kind of investor are you?’