Aarati Krishnan
Q, I’m from Tamil Nadu and read an article on traditional versus modern investments. I was really impressed by the author’s viewpoint. I have ₹72,000 in a savings account. I want to invest but I am unsure where to invest, whether I should go for traditional investments such as gold, bonds, land or digi-gold or modern investments such as cryptocurrencies. I want to invest in digi-gold. Is this safe? Shall I invest in the stock markets?
Kathiravan
A. While it is important to be aware of new investment options that are cropping up, you need to make your decision on where to invest based on two factors. One, whether the product you want to invest in is well-regulated. Two, whether it suits your financial goals, the time horizon over which you can remain invested and your ability to take risk (that is, see your investment value go up and down). Whether product sellers or others label the product as ‘modern’ or ‘traditional’ need not matter.
To explain the first point, bank deposits, deposits with companies, shares, mutual funds, gold exchange traded funds, sovereign gold bonds etc. are regulated investments. This means that the entities taking your money when you invest in these options are subject to specific rules on the nature of investment, disclosures and risk controls, and are overseen by regulators such as SEBI or the RBI. If the entity taking your money defrauds you or fails to follow rules, you can complain to the designated regulator and get relief.
But investments such as digi-gold and cryptocurrencies are unregulated investments. If you face an issue with service or returns, you will not have clear recourse to a regulator to lodge a complaint. Digi-gold is among the relatively new options to invest in gold, where mobile wallet companies, banks or brokers allow you to invest even small sums to acquire physical gold which is then held in their vaults on your behalf. However, it isn’t clear if digi-gold is under the purview of SEBI — the commodities regulator or RBI — the banking regulator.
If you’re interested in gold, we suggest you buy gold Exchange Traded Funds (regulated by SEBI) or Sovereign Gold Bonds (regulated by RBI) instead. The latter will offer you interest over and above the appreciation in the value of gold over your holding period.
On cryptocurrencies, not only is the asset class completely unregulated, there is no regulatory clarity on whether the investments are even legal. The RBI has been repeatedly warning the public that cryptocurrencies are not legal tender. The recent Budget sought to tax profits on cryptocurrencies at the highest rate with provisions that are meant to discourage its ownership and transfer. The government is said to be working on a cryptocurrency bill which will decide on the legal status of the asset. This makes cryptos a risky asset to own, quite apart from the investment’s own high volatility in returns.
This apart, instead of straightaway picking gold or any other investment for your savings, you should be mapping out your goals, your risk appetite and horizon to choose the right balance of investment products. In the long run, the best investment results are earned by diversifying across asset classes and not by betting all your savings on one. Use this URL or scan the accompanying QR code for our article that explains how you should decide on the right products to invest in: https://bit.ly/InvestmentBeginner
Q. I am 21 and I have a small amount of savings. Where can I invest these savings? Do you think post office is the best option? What are the different savings schemes available at the post office? What return can be expected after 4-5 years?
Bharathi J.K.
A. Bank deposits and post-office schemes are good options for first-time investors with small savings. These are products where your investment earns fixed interest over time and your capital remains safe. Bank fixed deposits allow you to park money with the bank for periods of your choice from one week to five or even 10 years. You earn a fixed rate of interest and can opt for regular payouts or for your interest to accumulate until maturity. Banks also offer recurring deposits or RDs where you can regularly invest the same sum every month to build up a deposit. RDs also earn fixed interest rates.
India Post offers a range of schemes for small savers across its branches. Two shorter term savings products are post office time deposits for 1, 2, 3 and 5 years with annual interest payouts, the monthly income account where you invest a lump sum and get monthly returns. Besides there are five-year National Savings Certificates (NSC) and the Public Provident Fund (PPF).
The NSC allows you to earn cumulative interest over 5-year periods. PPF is a 15-year scheme that accumulates interest and allows you to save regularly so that you can accumulate significant amounts by the time you retire. The returns on all these options vary with interest rates in the economy. Currently, bank deposits with leading banks offer interest rates of 5.5-6% for 5 years. Post office time deposits offer 5.5% per annum for 1-3 years and 6.7% for 5 years. NSC offers 6.8% per annum. But as rates can rise, it is best to stay with 1-2 year options now and switch to longer term options when rates are higher.
അഭിപ്രായങ്ങളൊന്നുമില്ല:
ഒരു അഭിപ്രായം പോസ്റ്റ് ചെയ്യൂ