Moneywise: Don’t over-invest in PPF, NSC

Debojyoti Ghosh / TNN / Feb 25, 2008, 00:44 IST

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Wealth managers feel the primary attraction of traditional investments is the perception of safety.

Moneywise: Don’t over-invest in PPF, NSC

BANGALORE: Nanjunda Rao (60), a professor of mechanical engineering, has been a regular investor in traditional investment products for the last 30 years. His investment portfolio includes instruments like LIC, public provident fund (PPF), national savings certificates (NSC), fixed deposits (FDs) and infrastructure bonds.
For him, investment in equities was never a priority.He thought they were risky. Recently, he ran into a wealth manager who told him that investments in traditional products are important but shouldn��t occupy a major chunk of portfolio.
"Now I��m beginning to invest a little in mutual funds and equities, Rao says.
"Everyone hates losing money, says Shyam Sunder, MD of PeakAlpha Investment Services. "By playing too safe, you could lose money by earning negative real returns (after taxes and inflation). Traditional investments were hugely popular twenty years ago. They were safe, gave decent returns and were easy to invest in. However, they have not borne the onslaught of private investment options very well.

Today, most of Sunder��s clients find that PPF and NSC are more about wealth preservation than wealth creation. "When they wish to build a fortune, they��re better served by investment options like MFs.
In recent years we have witnessed a tremendous growth and strengthening of the capital market. With new techniques traditional products are losing their place in today��s investment portfolios.
"It��s imperative for rigid investors to bring in a change in their portfolios and strike a good balance between the traditional products and the new age investment avenues to get the best return on investments.

The allocation in traditional tools has to be balanced according to the age, liquidity requirement and risk perception of the individual, says wealth manger Anand K S.
Wealth managers feel the primary attraction of traditional investments is the perception of safety.
"But today we have a range of options that offer similar safety, with better liquidity and higher post tax returns. The higher post tax returns arise out of tax-free nature of dividends from liquid or other bond funds, says T Srikanth Bhagavat, MD of Hexagon Capital Advisors.
"This is the e-investor era where everything happens at the click of a button, provide flexibility, liquidity, transparency and attractive returns. However, excess of anything is bad and traditional investments should still form a part of one��s portfolio, but to a limited extent, says Anil Rego, CEO of Right Horizons.

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