Airline employee, Vishal Surve (31), knows this is the right time to invest in equity, but is unable to generate enough cash and confidence to do so. He prefers to limit his savings within safer confines of bonds, deposits and provident funds.
"The amount invested has fallen from Rs 70,000 in PPF and Rs 55,000 in stocks last year, to only Rs 50,000 in PPF this fiscal," said Surve.
A slowdown is a bad time for jobs and salaries. This is also the time to watch investments carefully and put money in instruments that can safeguard one’s interest for a year or two without undue optimism.
Experts are of the view that individuals should invest to cover their debt obligations (home loan, car loan) and other commitments over the next 12 to 24 months.
“Without pressing the panic button, investors need to secure their commitments over the next 12 months and put them in liquid funds or short term debt products,” said Lovaii Navlakhi, managing director, International Money Matters.
Liquid funds and short-term debt products will provide liquidity cushion to the individual when required. Equity investments should be dedicated to last at least three years and hence emergency funds built up for a rainy day should not be placed there.
Individuals need to get rid of high cost debt linked to credit cards and personal loans that can become a burden in times of difficulty.
While those are broad rules, for each individual , a cash flow analysis is required. “There should be no mismatch between asset and liability and debt should be optimised,” said Surya Bhatia, a Delhi based financial planner.
While cash is the best thing to hold on at these times, gold is the second best bet. With uncertainty all around, gold has seen a lot of demand and has seen a huge surge in its value (currently at levels of Rs 15,500 per 10 grams).
Meeting your commitments is important and it is also imperative to transfer all risk at low cost and that’s where insurance comes to play. “If you don’t have a life insurance or health insurance, get adequately insured so as to manage any contingency in troubled times,” said Amar Pandit, a Mumbai based financial planer.
While savings should go up to build a back up corpus, investments into mutual funds should ideally continue.
Market experts feel that the time is good to put money in shares.“While fresh investment in equity can be avoided, the ongoing investments should continue,” said Bhatia. “Pulling out at low levels is never a good idea.”
When the tide turns, the return on investments (made at current levels) should have a big upside.