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What’s Hot What’s Not This Season?

2017 had been a great year for our stock markets. Unlike before when our markets were dominated by foreign investors, domestic investors now outnumber them. Majority of these participate in the markets through Mutual Funds because it’s a safe and professional way for clueless investors to invest in stocks. However this increased investor interest for equities has jeopardized other asset classes like gold, and bank FDs which did not perform that well in 2017.

So where does that leave us in 2018 with our investments, let’s find out:

#1. 2018 will not be all about equities:

After great returns in 2017, it is time for equity investors to moderate their expectations. “2017 was a good pitch to score, but 2018 will be a bowling pitch and difficult to score. So investors need be extremely selective while picking stocks,” says Nilesh Shah, Managing Director, Kotak Mahindra Mutual Fund. (originally published in ET)

What does that mean? Basically this means if last year you saw returns in the range of 20% this year lower your expectations to 10% and be extremely picky when selecting your stocks.And like they say what goes up must come down, it’s very likely that the markets might come down this year. In financial terms that’s called a correction. And it will happen this year due to increased government debt, hardening crude prices, rising inflation and RBI raising rates and also because people will want to quickly make profits when markets are at an all-time high.

However this correction will not be too deep unless something major happens in the economy. Experts suggest that you should continue investing in equities despite the risk. That’s because equities are volatile but if you’re in it for the long run you’re good to go!

#3. But equities will still outshine debt markets:

2017 had been pretty shaky for debt markets.

What are debt markets? These are markets dealing with debt instruments or fixed income instruments like bonds. Bonds are like giving loans to someone, either the government or a company. In exchange of these loans the bond issuer (i.e. the government or company to whom you give the loan) will give you interest and on maturity will pay your original amount back. There are long term bonds or even short term ones.

One thing that affects bonds is interest rate movements in the economy. When rates are up, prices of bonds fall because investors move to newer bonds that give higher rates. This makes old bonds unattractive and their price falls. So this means longer duration bonds are more sensitive to interest rates and that’s why we suggest avoid investing in longer term debt fund instead you can invest in short term debt funds or bonds because they are safe and offer better returns than bank deposits.

#2. You will always be ‘SAFE’ with Bank deposits  :

At times like these when markets are extremely volatile and you’re iffy about entering them, a percentage of your money in bank deposits, treasury funds or any other safe asset with complete flexibility and no penalty on withdrawals is recommended. For conservative investors you can allocate more money as it offers stability but for risky & savvy investors this cash can be a great asset to help in panic situations which keep happening regularly these days.

 #4. Gold will remain gold:

During inflation gold could be your best friend because it acts like a perfect hedge against rising prices. And with everything just getting so darn expensive including some gold in your investment portfolio this season seems like a good idea. According to ET, gold will go up this year.  But don’t get too excited, because the returns might not be too shiny to match up to equities. If you intend on investing in Gold then allocating 8%-12% is good enough.

#5. And lastly Cryptocurrencies will still be considered an outcast:

The recent crash in bitcoins and other cryptocurrencies serves as a wakeup call for investors. After coming close to $20,000, bitcoin’s value has crashed to around $13,600. Despite this kind of volatility and no fundamentals to back up, what has drawn people to cryptocurrencies? “Bitcoin is a classic case of the fear of missing out on making money. Some young techies are still chasing it,” says Tarun Birani, Founder and CEO, TBNG Capital Advisers. (Originally published in ET)

This means staying away from cryptocurrencies at the moment seems like a good idea. Until there is some clarity or law regulating them you shouldn’t venture to the dark side. So tick to the good old stocks because you rather risk losing some money than losing it all.

Now that you know the general idea about what’s been up in the economy, you can make your decisions. Have further questions? Feel free to comment and let us know or email us at hello@missmanage.com.

 

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