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Invest Your Money in Gold and Government Bonds as Stock Markets are Down
With uncertainty in the stock markets due to trade war between US and China experts say people may shift to safe haven assets such as gold, pushing gold demand up.
The stock markets across the globe have been going through a bloodbath. Real estate industry has been in a slump for quite a long time. Bitcoin, which gave an extraordinary return last year, has not recovered from the fall, yet. In such a scenario you are left wondering where to invest your money. To help you out here are a few tips on where to invest your money in 2018.
With uncertainty in the stock markets due to trade war between US and China experts say people may shift to the safe haven asset, pushing gold demand up.
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Sunil Sharma, CIO – Sanctum Wealth Management, says, “There are geo political factors at play that could lead to a rising interest in the precious metal. However, gold remains a non-interest bearing asset and a non-cash flow producing asset. Therefore, we advise investors to allocate a small proportion to gold in their portfolios. When gold prices show movement, one can add further.”
Not only are the technical models suggesting a buy on Gold, but there are fundamental factors on the horizon that also suggest that gold could see higher prices in the medium term. For example, in the past the exemplary performance of Indian equities led to a shift in investor preference, but now analysts think a correction in the stock markets may prompt gold buying. On Friday Nifty closed below the crucial level of 10,000 for the first time since October 12, 2017 as US President Donald Trump imposed tariffs on Chinese goods fearing a start of the global trade war.
Therefore, you can cosider investing 10-20 per cent of the portfolio in gold as it could significantly reduce risk and enhance the returns of the overall portfolio. Nalini Jindal , Chief Investment Advisor, Intellistocks, says, “We were having 0% weightage of gold in our portfolio but now we are again advising our clients to invest around 15-20% in gold.”
Interest rates are low in the case of bank deposits but in capital markets bond yields have already started rising. With yields on rise you can consider investing in government bonds.
Rahul Parikh, CEO, Bajaj Capital, says, “Locking in yields via Fixed Maturity Plans or FMPs is an attractive option that eliminates volatility and locks in yields. However, it should be kept in mind that FMPs are usually not liquid. One thing that is noteworthy is that most investors purchase fixed income with a three year holding period for tax advantages.”
In the debt fund category one can look into corporate bond funds, which have attractive yields ranging from 9% to 10.5%. “Accrual funds present an attractive investment opportunity for conservative clients over the next 3-5 years.”
Accrual funds are the type of debt funds that hold securities until maturity. Corporate bond funds invest in higher quality paper and do not take high credit risk.
Different asset classes perform during different stages of the business cycle. So the golden rule is to diversify your portfolio. Sharma, says, “Since last fall, we have been advising clients to cut their exposure to equities and going forward, our asset allocation model remains tilted towards bonds. At some point, equities will look attractive. In the meantime, we believe that fixed income – corporate credit funds or FMPs – offers attractive yields. The other asset class that is also looking interesting because of what is happening geo-politically is gold. Investors can allocate a small portion of their portfolio to gold.”