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Steps to guard against global volatility

The falling markets might present an opportunity for investments, but one has to be clear about the nature of the investment and the way in which it is expected to perform before making any commitment.

business Updated: Sep 17, 2008 21:26 IST

The primary question in the minds of most investors today is, “what should I do with the funds that I have at my disposal?” The falling markets might present an opportunity for investments, but one has to be clear about the nature of the investment and the way in which it is expected to perform before making any commitment.

Till that is decided, there is a need for look for routes that might present some short-term relief to the investor. For those who want to look at other routes, apart from equity, till they formulate a future investment plan, here are the options.

Liquid fund
An individual can opt to invest in a liquid fund for a short time, while he chalks out the course of his investment.
These funds are meant for such short-term investments and the return that they will earn here will be slightly higher than the savings bank interest. However the biggest relief is in the form of minimised risk because these schemes are not expected to result in a negative return because they invest only in overnight call money and other similar instruments.

Fixed maturity plan
If a person wants to invest his money for a few months, then looking at the short-term fixed maturity plan (FMP) that matches their needs would be appropriate.

This can be followed only when the FMP is available for a time period that matches the investment time horizon of the individual. In that sense there might be some mismatch and at the same time the investor has to be alert because any attempt to take the money before the time period can result in a large exit load being levied.

Short-term deposits
If these two routes are not appropriate, then it is best to look for some short-term deposits. This can be a 7-day or a 15-day or even a one-month deposit.

In order to reduce the burden, the investor can instruct the bank to keep rolling over the deposit for a similar time period at the time of maturity so that there is no need to constantly track the invested amount. This will provide some relief till things stabilise in the markets across the world.