Investment Options

Short Term Investors - Different Investment Options Stock markets have got into volatile mood in the last couple of days. Though this has proved to be a regular affair, every year, this time the P-Note controversy has added more fuel to the selling pressure.

While long term investor can sit tight with their holdings, short term investors with a less than one year horizon will have to look at different options. Here are some of those options:
Fixed maturity plans: The action has picked up on the fixed maturity front with 90 day FMPs offering annual returns in the region of 8.6%. The added advantage with FMPs is that they don’t carry any entry and exit load and short term investors can look at parking their funds in FMPs. When you compare the returns offered by bank deposits for a similar tenure which is in the region of 5-6%.The returns from FMPs are much higher. Since FMPs carry a better tax advantage when compared with fixed deposits, this could be an option for those who are regular investors in mutual fund schemes.

Fixed deposits: For some, FDs appeal because of the ease with which they can be opened. Though interest earned on fixed deposit is taxable, an FD has remained a favourite investment option for many investors. The biggest advantage with FD is that the funds can be transferred on the same day unlike an FMP.However, the disadvantage is that the entire FD account will have to be closed even if the fund needs for a partial amount. While investing in FD, keep an eye on the different rate of interests for different tenures because even an additional day offers a slightly better interest rate.

Gold: Though returns from gold tend to be slightly above inflation in the long run, this can be a good option for short term. With crude prices soaring and uncertainty in the global financial system increasing, we would recommend investors to allocate a portion of their corpus for gold for short term.Besides gold coins, gold funds or Gold Beas can be other options for investors. Unlike coins, these are easy to liquidate and are also easy to invest.

Arbitrage funds: Besides traditional debt products, arbitrage funds can be another option as they allow fund manager to use short selling options. Though markets have lost of lot of sheen in the last couple of days, technical analysts are estimating new lows in the coming days.

Even otherwise, the next few weeks could prove testing times for the Indian markets as global market mood does not look very encouraging. In such a scenario, funds which use short selling as an investment option could be the best place to be in.

Many may wonder as to why they should look at other options when one should be actually buying into equity during its downtrend. As I said earlier, these are typically for investors who are looking at short term options and sitting on cash. Though being in cash could be one of the safest bets, it may not be an easy option for active investors.
Also, the above options allow an investor to earn returns even in a downward market scenario. For long term investors, the options are completely different. In fact, they can start accumulating some of the fundamentally strong scripts during every correction.

You are advised to make enquiries before taking any decisions on financial issues.

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