Friday, August 20, 2021

On Investment Options

People frequently confuse Asset Classes, Vehicles for Investment, and modes of investing , for  example I have heard questions like

"Should I invest in Equity, Mutual Fund, or SIP? " when you can actually do all three at the same time! 

What follows may be elementary to most, but it may need reiteration for some. 

You should  keep the following distinctions in mind: 

Asset Classes: equity, debt, Real Estate, Gold

Investing through ( vehicle for investment) : direct, or through MF

If Gold: physical gold biscuits, ETF's ( which is an MF) ,  Sovereign Gold Bonds

If Real Estate: Direct or through MF 
If Real Estate MF: InVit, or any other

If debt: direct ( bank FD, direct corporate FD, VPF, PPF, any other instrument... Or through MF)

If debt MF: 
Duration of underlying Paper:  short to long

Credit Risk: Zero to High

Quick pointers:

Investing in FD's is usually tax inefficient. For debt , investing through MF's is better

Debt MF's investing in long term paper carry interest rate risk 

Gold Ornaments don't count as investment.

The era of Real Estate as a preferred  Asset Class is over. 

The era of high interest rates are over. 

Low inflation is only on paper. 

You will see your lifestyle costs going up in the next few years, along with drop in real wages. We are going the way of the west, which generally means we are going to get screwed. 

Diversify, but not too much

It is a field that is complex, most times  needlessly so, and  In case you don't wish to spend time understanding it, consult an expert.

Beware of experts in any field. Most of them know very little, and they mostly work to maximise their gain, not yours

Derivatives, Currencies, Futures, Options, Cryptos, Commodities are not investment. Unless you are an expert, stay away. If you are an expert, beware. Many a strong swimmer has been swept away by the current.

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