Investments are meant to make money but there are investments where every one of us has invested and lost money. Do you want to know where?
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Inflation
Gold is always a safe option for investors and there have been lots of positives about investment in gold but do all those hold true in the current scenario? What should be your ideal allocation to gold? What are the major factor that attracts investment in gold? What would you opt for if you have an investment option as good as gold? Let me answer all these questions.
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An article by Vinay Kumar for making his friends understand why it is important to invest in mutual funds and how mutual funds delivers inflation beating returns that not only saves tax under 80C but returns are tax free as well.
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Clarification on my list of forever stocks that I shared few days back along with the reasons for selecting those stocks as well as criteria for selecting your forever stocks.
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RBI announced its much awaited monetary policy couple of days back. It was almost in line with the market pundits expectation that the RBI would not increase the rate and as such, RBI has left all the key rates unchanged.
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Whenever inflation is mentioned, the markets promptly obey the law of gravity and fall. There is no doubt that inflation is an investors worst enemy. Equity investors lose as companies borrowing costs rise, credit becomes tight, and margins are squeezed.
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History shows that returns from equities and bonds suffer when inflation surges. Upswings in commodity prices raise the cost of materials, curb corporate profits and push inflation and bond yields higher.
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A short term investors should invest in debt products as they give assured returns. On the other hand, if investors are prepared to wait for least three years, they can look at equity. But they need to invest in a staggered manner. For instance, look at daily and weekly STP’S (Systematic Transfer Plans).
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The retail credit growth of the bank in 2008- 2009 is expected to be in a range of 5% only. Also, if RBI increases the repo rate, at which it lends short term funds to bank against governments securities, the interest rate will further increase. Bank will have no option but to pass on the rate to borrowers. This will further slow down the growth.
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Most of the finance and entertainment industries are based in Mumbai which attracts the big spenders, through the city’s inhabitants who are not habitual high spenders. Also, Delhi has more of “Me” culture and Mumbai has more of a “We” culture. It is more common to find families eating out at restaurants in Mumbai than in Delhi.
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As per many Guru’s on TV inflation is likely to surge to 17% by September 2008. The government is likely to hike prices between 10 and 20% again, as early as September to limit fiscal risks. The rise in the price for the Indian crude oil basket could be the trigger for another round of increase in fuel prices to $145 to 150 per barrel from the current $132 per barrel.
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The government should also ban needless use of cars in a planned manner. Buses, trucks, housing and railways should be subsidized, with massive cuts on service taxes and direct subsidies for carrying passengers and cargo at cheaper rates.
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Private sector banks might increase their lending rate to one percentage point (100 basis points). There is a possibility for many, to increase the rates by one percentage point from July1, 2008. This happened because of the inflationary pressure which has led to an increase of interest rates.
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It is important to understand the fact that when the inflation rate goes down, it does not mean that prices are actually declining. It only indicates that the rate at which prices are going up has slowed down to a certain extent.
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Wheat prices in India have fallen 50% from February onwards. Similarly, Soyabean and Sugar has come off any where between 15 to 25%. If you feel that oil inflation is certainly going to stay here for a while, then I must add here by saying that food inflation is looking southwards. So, over all things are good.
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