Disruptions are here to stay, save wisely

Disruptions are here to stay, save wisely

In this age of continuous disruptions, the only constant is change. There is a perpetual risk to our regular sources of income – be it a job or business. What we need is to have the cushion of carefully planned savings to comfort us during times of disorder. It is therefore important to save wisely into investments considering the key factors of Liquidity and Risk-Return trade-off to keep maintaining our levels of life-style

disruption

This savings pattern has been true for most Indians historically, but we need to ask ourselves if this is wise anymore. Let us assess each asset class separately in order of our past preference

  1. Real Estate – not very liquid, and to extrapolate the trends of the last few years, this sector is fraught with high risk of delays and disputes even with the most reputed names in the business. Going forward, with the government’s determination to curb black money coupled with their resolve to provide low cost housing for all by early next decade, returns from real estate investments will be sub-par. Not the ideal destination to allocate large amounts of our savings
  2. Gold – With the USD reclaiming the crown for international safe-haven, returns from gold would revert to all time averages of 2-3% per annum
  3. Fixed return instruments – though safe, such means always provide returns commensurate to Inflation, pre-tax
  4. Equity –The Indian economy is passing through a secular growth phase, something which economists project to continue till the next two decades. Historically, when the (now) developed nations passed through periods of similar economic growth, equities proved to be the best wealth creators. While direct equity can be very risky, Mutual Funds offer some of the best portfolios managed by experts that diversify risk. They have demonstrated track records of some of the best returns across asset classes. Add to that easy liquidity and convenience, makes for an asset class to be banked upon

Good time to reverse the order of our investment choices

Your Comment

Leave a Reply Now

Your email address will not be published. Required fields are marked *