The coronavirus pandemic caused a great threat not only to the public’s health but also on the investments. The city lockdown took a toll on the global economy. The prices of commodities have fallen globally. The equity markets have also witnessed extreme volatility across the world and debt investments have also triggered some panic among investors due to their underlying credit risks. With so much volatility in the market, you might be confused as to where to invest money safely and ensure the growth of capital.
Here are a few options for investments where you can invest even during such volatile market conditions.
- Small savings schemes
The Public Provident Fund, National Savings Certificate, Senior Citizens Savings Scheme, etc. are the small savings schemes that offer attractive interest rates. These small savings schemes come with a sovereign guarantee. Depending on your financial goals, liquidity requirement and investment tenure, you can select appropriate investment products under the schemes. The small saving scheme offers great tax deduction benefits that will majorly lower your tax burden.
- Fixed Deposit (FD) & Recurring Deposit (RD)
Both FD and RD are fixed-income investments that offer a guaranteed return on maturity. Deposits are secured investment options that usually fetch higher rates compared to a savings account. For additional capital safety, you need to open deposits with banks that have a good track record and low Non-Performing assets (NPA). Lastly, if you are planning to invest for a long-term objective, you may opt for the FD laddering technique that will enhance your returns and ensure high liquidity at the same time. FDs and RDs are useful tools for planning your future expenses and financial goals like your children’s education, marriage, repairs for your home, down payment for a new house, foreign trip, etc.
To invest in gold it is advisable to consider digital investment options to steer clear of purity, making charges, and safety concerns. Your investments options include gold mutual funds, gold exchange-traded funds, and the SGB (Sovereign Gold Bond). In fact, SGBs are great tools to ensure an additional, guaranteed interest income at the applicable rates compounded semi-annually over and above any capital appreciation. While making gold investments ensure that the investments do not exceed 5-10% of your portfolio’s value as gold prices can be volatile, apart from the fact that gold tends to flat line for long periods.
Unit Linked Insurance Plan (ULIP) is a mixture of insurance and a tax saving investment. The insurance company sets aside a portion of your investment towards life insurance and put the rest into a fund that is based on equity or debt or both. There are various types of funds available in a ULIP that can help you safeguard your investments. They are as follows:
- Equity Funds: These ULIPs are of the riskiest investments and also the one offering the highest rewards. If you have a medium-to-high risk appetite you can opt for one of these plans.
- Income, fixed-interest, and bond funds: Under these ULIPs, your funds will be invested in government securities, fixed-income securities, and corporate bonds.
- Cash Funds: This one is a low-risk ULIP investment. By investing here your corpus will get directed towards money market funds, cash and bank deposits and other money market instruments.
- Balanced Funds: These are the most stable and prudent investment with low risk. These ULIPs invests in proportion, and divides the total investible amount between equity investments in high-risk equities, company stocks, etc. and fixed-interest instruments.
- Liquid funds
Amid the volatility in the market caused due to the coronavirus lockdown you can consider making an investment in liquid mutual funds and earn a moderate rate of return. Liquid funds are one of the most secure mutual fund investment options that ensure high liquidity. In liquid funds, the corpus is invested in products like a certificate of deposits, commercial papers, treasury bills, and securities. However, it is best to avoid liquid funds that have exposure in securities with poor credit ratings.
Before you start investing ensure your investment decisions aligns with your financial goals, risk appetite and liquidity requirements. When in doubt, you can consult your financial advisor to make better decisions on investment options in India amidst the coronavirus crisis.