Stay invested for long term

BANGALORE: In a meltdown like this, where everything looks so uncertain, where does one invest one's money? In US, many are actually just holding on to cash ��� whose value will only decline to the extent of inflation.
Some here still see hope in certain stocks. Hitesh Agrawal, head of research at Angel Broking, admits market sentiments could take stocks down to any level."But if the fundamentals of a company are strong, you can pick up its stocks irrespective of good or bad times," he says.
Real estate stocks are seen to be best avoided now because more correction in property prices is expected in the next 12-18 months. Consequently, cement companies are also not a value buy at this time. Last quarter was bad for this sector and this is unlikely to change in the coming four to six quarters. It may also be wise to stay away from the non-ferrous metal sector.
"However, investors can look at auto, banking and infrastructure as they offer a lot of opportunities. FMCG and media are also good options as these are not interest rate sensitive," says Agrawal.
Wealth managers say it's advisable to enter the market with a long-term view. "First time investors should invest systematically with a long term plan of three to five years. For investors who already have investments, stay put," says Lovaii Navlakhi, MD of financial planning compnay International Money Matters. Fixed maturity plans (FMP), money market instruments like liquid mutual funds, floating rate funds and structured notes are likely to more safe. FMPs function similar to bank fixed deposits. FMPs invest in debt securities that mature at the same time as the fund and so are not affected by interest rate fluctuations.
"Equity and debt is inversely co-related. Last year when equity boomed, FMPs gave returns of 7% to 8%. But this year returns have gone up to even 11.5%. The yields are high in FMPs compared to FDs and the tax treatment of FMPs is favourable when compared to FDs, especially if you are in a higher tax bracket," says Daya Paul of Nile Financial Planners.
However, investors should be cautious while selecting FMPs. They should check which fund house it is coming from, its portfolio and exposure to the real estate sector. Investors should prefer the debt funds route instead of directly investing in bonds as it is diversified across various companies and bonds. Gold is also seen as a good option, as it acts as a hedge against inflation. Navlakhi suggests investors should increase their allocation to gold to 10% of their portfolio. Art is another vibrant option. "Allocation can be increased to about 20%," he says.