Vikas (name changed) has been working with a business process outsourcing (BPO) for the past two years and having seen several of his colleagues already been asked to submit their resignation because of the global financial crisis, is very scared of what might come up in the near future. Having abandoned his equity investment habit, he is purely focussing on cutting cost, increase saving and piling on cash.
While threat of a job loss may be a sound reason to save up in cash, volatility in the equity market, real estate and commodities also suggest that cash may not be a bad asset to accumulate in difficult times as one awaits a steadier investment opportunity.
“In the current situation one should keep sufficient cash to sustain them for 6-12 months as a preparation for any adversity and also to grab on any investment opportunity that comes in,” said Amar Pandit, a Mumbai-based financial plann er.
“The money should be kept in a combination of fixed deposits, liquid plus funds and short-term income funds.”
Bank fixed deposits of between three months and one-year maturity generate a return of around 7 to 8 per cent and the average annual return generated by the short-term income funds over the past six months stand at stand at 6.8 per cent.
Parking funds in these instruments can help one generate decent return for the short-term along with providing liquidity to the investor for the appropriate occasion.