Post demonetisation: Where to invest to get reasonable rate of returns

Well the whole country seems to be standing in a queue, either in the bank or queing up to confront

unprecedented time which they were not prepared for, also queing up are the business decisions in

this time.

Overnight the conversation between everybody turned about and around currency, money, banking

system and politics. If not much, this system has educated young generation much about economy,

banking mechanism and consequences for not valuing your own currency.

Much worse would follow if not this. With 98% transactions happening in black, and everybody

seeming to rule with their sense and idea about power, we were certainly destined to crash as an

economy. The whole government would fail if this dire and much needed bold step would not be

called for.

Number of predictions and economists has suddenly ascended in past week, with everybody trying

to decode the truth and picture their sense of positive future economic growth.

But soon from here, once this dust is settled, everyone has to learn to invest their money effectively

to generate reasonable returns. In financial theory, earning money and making wealth are two

different things. Every individual must know how to convert their earnings into wealth.

To make your readings more convenient and simple, we will discuss effects of demonetisation and

investment planning separately, point by point:

Some effects of demonetisation:

 Banks will have surplus money in savings account reducing their cost of money borrowings

 Interest rates may be reduced on loans

 At the same time, FD rates will also get reduced to compensate low income from loans

 Purchasing power in luxury goods and services will go down, making them cheaper

 Cost of Gold (for some period) will go down because of low demand

 This move will not stop black money generation but those who are generating it now will be

cautious and alert to convert it into white before every financial year end.

 Property market will get affected and land deals will be on hold for sometime

 Stock prices will go down on Panic

Now question is where to invest to earn good amount of return with safety of investment:

Every individual has different investment requirements, and in one article we cannot cover all

profile. We are discussing here an ideal form of investment plan. (for further details and queries you

can register on thecompletewoman.in and email your query)

 Investible amount = Surplus on hand after meeting all expenses, Medical Insurance, Life

Insurance, and instalments of Home/Vehicle Loans (all these are must for your safety and

tax planning, remember : tax planning is not tax evasion)

 Investment in Fixed deposits will not generate any earnings for you, it can not cover inflation

on year to year basis, still we advice that you keep 10% of your investment portfolio in FDs

as emergency fund.

 Out of balance fund, every month plan SIP of Gold (upto 20-30% of your investment fund)

This SIP you can plan as buying physical gold or Gold ETF (on stock exchanges). Gold is an

instrument which always covers inflation and over and above generates reasonable returns

along with security of fund.

 From remaining 60% fund Plan investment in Blue chip (NIFTY 50/top 100) companies. Do

not try to master all industries. Do not over diversify. Select 3-4 sector and invest in max 10

companies. Divide equal amount to all stock you select. Keep investment horizon of 1 year

minimum. Do not speculate or do intra day tradings. Never have naked Future and options

positions (in my opinion, unless you understand derivatives, do not try Future & Options).

Over a longer term a with proper planning Equities give best returns compared to all,

provided you are ready to learn to minimize your risk, as equity market is volatile, risk and

tempting.

If you keep investing on above guide lines year by year then cumulative return will be much

higher than what you expect.

For compounding effect on investment read http://thecompletewoman.in/yesyou-could- be-

a-millionaire/ in my money section of thecompletewoman.in

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