Dr. Sanjiv Agarwal
Yet another not so good year 2011 has passed by. It was neither good for economy, nor for politics or for investors. While investors suffered on account of higher inflation, higher interest rates and higher petrol prices on one hand, capital markets also did not rewarded them at all.
Both, Bombay stock exchange and National stock exchange fared badly and closed the year with negative growth of over 20 percent. Thus, the investors suffered and got their capital eroded. Same happened to the primary market offerings with current listings ruling as low as 5 to 10 percent of the offer price in most of the cases.
What the investors should do then? Currently when the markets are falling, it may be desirable to buy or invest in stocks, but of course for long term. Even the law of averages support this view. One should not exit the equity investments at this stage. The same applies to mutual fund units. Selling in bad times is certainly a bad move. However, one needs to reallocate their portfolio to have debt so as to have steady returns. Those who have invested in debt or fixed income securities could fetch better portfolio returns in 2011.
The new year 2012 may not hold high hopes for stock investment but it is surely right time to in invest stocks with goods valuations and prospects over next 2-3 years. We need to shift focus from short or medium term to long term investing in stocks and unites. Those who want a balanced portfolio ought to have about 15-20 percent invested in bullion- gold and silver. Ideally, gold should form a compulsory part of investment portfolio irrespective of its form (physical or ETF). It is a hedge against risk and inflation and has shown steady returns over a period. This could well be a rise management and diversification strategy. While diversification is expected from every investor, it should not only be practiced in stocks but across the asset class. Silver too could be a preferred choice over stocks but not over gold. Both metals are likely to continue their bullish trend.
Regular investors who have investable surplus could also opt for high rated non-convertible debentures or private equity. These days NCD’s from real estate sector and private equity are also preferred by high risk taking investors. However, it is on always safe to limit this segment of portfolio to 10-15 percent.
Investment is a game if you have both- money and experience. Without any one, you can not succeed. So, better if you acquire one so that investments in 2012 becomes not only rewarding but also make you happier.