Uday Kotak warns of ‘bubble territory’ ....!!!

Top 5 investment options in India for risk-averse investors in 2018 as Uday Kotak warns of ‘bubble territory’

Are you a risk-averse investor and looking for risk-free investment options in 2018? Here are 5 such avenues you can consider for investing in the New Year.

By: Sanjeev Sinha | Published: December 26, 2017 4:56 PM

Financial experts say that the days of easy money making are certainly going to get over soon and in this context, Uday Kotak’s words of caution are well timed and appreciable.A recent tweet by Uday Kotak, managing director of Kotak Mahindra Bank Ltd, has caught the eye of investors, especially those looking for risk-free investments in 2018. Kotak has tweeted that “when savers move money from debt to equity since debt is risky in rising interest rates we are in bubble territory. Savers need to be alert.” However, while investors have given their diverse views on this, financial experts have welcomed Kotak’s views.“Mr Uday Kotak’s words of caution are welcome as complacency and overconfidence are certainly setting in. Equity markets are expensive and though opportunities for stock picking are still plenty, but without proper research and a well-thought financial plan, investors could head for a disaster. The days of easy money making are certainly going to get over soon and in this context, Uday Kotak’s words of caution are well timed and appreciable,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.Financial planners also say that if all investors start moving their investments to one asset class, then more than fundamentals, it is inflows which drive the growth. It happened in real estate before when investors shunned equities since it was generating amazing returns. “Now the same thing seems to be happening in equities. In such scenarios, one often tends to neglect the risk characteristics of the asset class and one’s own appetite leads to the bubble situation. However, I still feel that may not be the situation. Look at the numbers and you will notice that money in equity mutual fund is majorly coming through SIPs where average holding period is five years. This shows that investors do wish to give time to their investments,” says Jitendra P S Solanki, MCSI, CTEP, CFP, and Financial Planner for Special Needs Dependent Families.“Yes, corrections in equity markets do happen and investors should be ready for it. Still, in such huge inflows, many investors forget about asset allocation, which is a sign of worry,” he adds.Whatever be the case, the question arises, if moving money from debt to equity is risky in a rising interest rate regime, then what should investors do – particularly those who are risk-averse? What are the other investment avenues currently available for them keeping in view their risk appetite?Here we are taking a look at 5 investment options for risk-averse investors in 2018:Bank deposits or treasury funds: Bank deposits and treasury funds are suitable for risk-averse investors as they carry minimal risk and do not turn negative when interest rates go up. “These are especially good for short-term horizon. Though change in taxation has reduced the tax efficiency of money market mutual funds, they still have capability to deliver better returns,” informs Solanki.Gold: Gold is still a good hedge against inflation. In longer terms, this asset class tends to deliver considerable returns. Moreover, “gold is linked to international prices, has underperformed for quite some time and usually does well in uncertain times. And with new options like Sovereign Gold Bonds, investors have various options to invest in gold now,” says Kapur.Arbitrage funds: Arbitrage on your own or through mutual funds is another safe option. Arbitrage between cash and future and option segments in equity markets is one option. Similarly, there are options available in the Forex and commodities market. Arbitrage funds are believed to be a good option for risk-averse investors. Due to the underline strategy, the downside is protected. Also, the taxation of equity funds is what makes them attractive.Government-backed schemes: Government-backed fixed income securities like PSU Bonds, NSC and KVP certificates as well as PPF accounts are other very safe options available for risk-averse investors. All these small savings schemes are good for any risk-averse investor. Though yearly returns vary now, they can still deliver good returns. PPF, in fact, provides the best opportunity among all these schemes.Real Estate: Real estate is another good option for investors in current times as “property prices have come down from the peak levels and this market again has underperformed for quite sometime. Though prices are not likely to firm up again in the near term, but the risk-reward paradigm is certainly favourable for long-term investors,” says Kapur.Some experts, however, believe that making an investment in real estate has its own risk which shouldn’t be ignored. “Though in longer terms it delivers decent returns, the high capital requirement is what needs to be factored in. Also, much like equity, it has its own risks which are not favorable for risk-averse investors,” says Solanki.However, these risks can be minimised to a large extent if someone buys a well-located piece of property from a reliable builder and from a long-term investment point of view.http://www.financialexpress.com/money/top-5-investment-options-in-india-for-risk-averse-investors-in-2018-as-uday-kotak-warns-of-bubble-territory/990497/