What’s your investment choice this year?

Many of us would like to start the new year on a clean slate —- be it joining a gym, starting a diet programme or going on holidays. Better financial decisions will definitely be one among them. BusinessLine reached out to some to find out what they have promised themselves on the financial front this year.

Bank deposits popular

Unsurprisingly, most of the financial resolutions for 2020 are on growing the savings kitty. While there are various investment options available, including mutual funds, equity/debt investments and gold, most prefer to park their money in banks as fixed deposits (FD) or recurring deposits (RD).

Shiva S, a 25-year-old from New Delhi, who started his career two years ago, says: “I get to save nearly 40 per cent of my income every month in recurring deposits. This year, I want to make a fixed deposit for two to three years.”

Srilakshmi IndrasenanEntrepreneur

Srilakshmi Indrasenan, a 28-year old entrepreneur from Chennai, says: “I ensure that I save ₹5,000-10,000 every month in recurring deposits. For 2020, I want to make fixed deposits whenever I get bulk payments.”

Prashanth R

For 26-year-old Coimbatore-based student Prashanth R, post office savings make better sense. “Bank returns are low, so I prefer post office deposits. Nearly 50 per cent of the money I get every month goes to postoffice deposit schemes. I intend to continue the same this year, too.”

Swathi CS On a sabbatical from work

Swathi CS from Chennai has taken a break from work and invests from her spouse’s earnings. She says: “Over 80 per cent of the amount meant for savings goes to recurring deposits, but this year, I would like to make an FD, too.” Though she has an SIP in mutual funds running, she would rather make fixed deposits as the risks are lower.

Anjana, a Mumbai-based home-maker, concurs with Swathi. “It is easy to liquidate FDs than mutual funds, I feel. This year I would definitely make a minimum of two FDs of over ₹ 50,000 each.”

Sundar Ram MSenior citizen

Sundar Ram M, a senior citizen from Chennai, says: “For me, nearly 90 per cent of my monthly income goes to fixed deposits and other debt instruments. I will continue to do the same this year, instead of exploring new investment avenues.” Sundar Ram does have a minor exposure, less than 2 per cent, to equity shares to “try his luck”.

Bank deposits are safer than stock markets or mutual fund investments, which are subject to the risk of capital erosion. But it is not the best way to save, especially for the young working population. Also, bank FD/RD rates today are low, and to maximise returns, investors need to lock in when the rates are high.

Investing regularly through SIPs in mutual funds over a long term of 10 years or more, can minimise the risk as well as fetch good returns. Also, on the debt side, investors can consider other instruments such as the Public Provident Fund (PPF), National Savings Certificate (NSC). Thus, a mix of equity and debt instruments, according to each one’s risk appetite, is ideal.

For senior citizens though, FDs are a good way to earn regular income as also preserve capital.

Gold and real estate

Many want to bet on the yellow metal in the New Year, given the price appreciation last year. Also, Indians have always had an affinity towards for gold, particularly in the form of jewellery. So, people like Swathi consider it to be a good investment. She says: “I pay around ₹3,500 per month to a jeweller, so I can buy an ornament at the end of the period, for my wedding anniversary.”

While jewellers’ schemes — where you pay for 11 months and the jeweller pays for a one month — appear attractive, it is not a secure investment as there have been examples of fly-by-night operators disappearing with investors’ money. The recent incident of Goodwin Jewellers defaulting on their clients’ money is a good example of how unsafe such investments are. It is better to invest in gold in other ways, including sovereign gold bonds and gold exchange-traded funds (ETFs).

Vinothraj JWorks in a wealth management firm

Vinothraj J, who works at a wealth management company in Mumbai, prefers ETFs to jewellery. “The stock market seems overheated now, so I have started investments in gold ETFs and will continue investing this year, too.” Vinothraj has 5-10 per cent of his portfolio in gold.

Since property prices in certain regions are on a correction course, some people are willing to consider real estate as an investment option . Srilakshmi, for one, has started saving towards down- payment for a property buy in the near- to-medium term.

Other goals

For many, going on long holidays every year has become a must. Swathi plans to allocate nearly 20 per cent of her family’s income to save for a vacation this year. Vinothraj says: “I want to invest in short-term duration funds to save for holidays every year.”

Anjana, too, says, “I want to allocate 10 per cent every month towards a vacation fund this year. So, at the end of 2020, I can utilise it for my travel.”

Many are saving for contingencies, too. Vinothraj says: “I want to create a contingencies fund for medical emergencies. For now, he has health cover offered by his company. I want to update my health insurance cover for better coverage.”

Swathi, too, wants to save up to 20 per cent of her family’s income towards contingencies in bank deposits. “I don’t have an insurance policy, but for any emergencies, I would like to set aside some money starting this year.”

While it is important to create a contingency fund, it is equally important to take a plain-vanilla term cover for your life. Consider buying additional health insurance after 30.

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