Thursday, January 26, 2012


Being a banker, I am several times asked about how and where to invest. And many people ask me about good Mutual Funds also. Though this has not been my main domain in banking, recently on being asked I've done quite a bit of research on it, and come to the conclusion that the Mutual Funds which give you lesser returns generally attract less risk. But to get really good returns, one should keep the money for at least 3 years in it. As of now, due to rising rates of Gold, the Gilt Funds should be a good option for people.

But my own experience says that no matter how lucrative any Mutual Fund or Company share/ stock appear, remember that they are both market driven... If you can track 'em and remember to withdraw them at the right time, then only opt for them. But if you are saving for your future (by saving pennies from your hard earned money), better to put your money in Insurance Policies (they are of several types - from 'Life' to 'Moneyback' to 'Children's Plan' to 'Fixed income' after certain age/ time period, just like a Pension) or Fixed Deposits. Market driven funds are more suitable for people looking for making some quick bucks in addition to what they already have or safely saved.

But best option, where you will lose no money is - Fixed Deposits. Here you can invest fixed amount for a time period or monthly small amounts till whenever you want (these are called Recurring Deposits), where monthly an amount fixed by you, say, Rs 2000/-, Rs 5000/- or more is debited from your account and keeps getting added to the deposit. Or invest into fixed lump sum amounts as and when you have them. You can later utilise it fully or partly, whenever you want. For people who don't want the interest portion (especially Muslims), you can monthly make a donation to charity from your savings accounts which will nullify your interest amount plus additionally cover your Zakat amount. There are several Charity organisations which will be happy to receive your donation. According to me, best charity is for Children's education. Especially, of street children and orphans. Intially, I also was hesitant to invest in Fixed Deposits as there is interest involved in them. When I learnt this way out, I realised I hadn't saved much. Loose money kept in savings accounts, usually gets spent !

For working people of private companies, where you won't be getting a pension after retirement, please opt for Voluntary PF to your existing PF. That's the best way to save. For example, your automatic PF contribution from salary is Rs 1150/- (plus an equal amount from employer), you can ask your HR to additional deduct Rs 3000/- or Rs 5000/- or any other amount from your salary. You will get a lesser salary in hand, but will be happy several years later or when you quit.

Another safe way to invest is in Real Estate. But liquid cash is always better investment than assets, which require to be sold. And in emergencies, you end up getting a worse deal. Also house bought for staying in, cannot be considered as an Investment. You will not sell a good house bought in a good locality with dreams, and in which you are living in, just because market value increases. In such a case, you will only move to a not-so-good locality. And such a step will be required only in dire circumstances. Hope no one goes through such phase in life. But if you invest in an extra house for selling later or earning through rent, then yes, its an asset for you.

But spread your investments in various types. Even Gold is a good option. But remember, if you are buying gold for personal use, do not consider it as investment. You wouldn't want to snatch and sell off a beautiful gold ornament of any woman in your house just because you will fetch good money for it in the market, unless it is done for need. What is purchased for investment, should be treated as such and kept aside for it. And Muslims, please do not forget that hoarding gold attracts Zakat also. So do not forget to give in charity what's due of it.

Happy Safe Investing!

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