Your money: mutual funds and insurance set to grow rapidly
By Sunil K Parameswaran
When we invest, we tend to wonder which sectors of the economy are important, and which values in a sector are attractive. Investments in stocks increased dramatically after liberalization in 1991. The establishment of NSE, and its consequences on BSE, and the introduction of certificate-less trading, revolutionized stock investment in India, even in high-grade cities. 2 and 3 and cities.
Before that, every investor focused on gold and land. The first is questionable as an asset in our culture. Of course, gold ETFs today offer an interesting alternative for those who want to speculate on the yellow metal. Real estate will appreciate in the long run in India as land availability is limited and the population is steadily increasing.
Growth of mutual funds, insurance
Some sectors must do well in the medium and long term. For example, food and pharmaceutical products are safe bets. Regardless of the state of the economy, people have to eat and some will always get sick. In India, insurance and mutual funds are two rapidly growing financial products that are expected to be sustainable. India is an underinsured country. Health care costs are skyrocketing and people have realized the need for health insurance. Therefore, stocks of insurance companies should perform well over time. Given the growth in investment in mutual funds, stocks of listed asset management companies should do well. At the moment, there is not too much choice in India in this regard, but that is subject to change.
It is advisable not to invest too much in several companies under the same umbrella. Just as an investor would have a mental limit for investing in a stock, it is prudent to have a limit for the parent conglomerate as well. In addition, while we should not put all the eggs in one basket, the basket should also be diversified across industries. For example, 75% of your investment in IT stocks is not a good idea.
There are opportunities today to invest in foreign stocks, especially US stocks. While the US market is a regular performer, an advantage for Indian investors is that the rupee is likely to depreciate steadily. Thus, while investments abroad inject an additional dimension of risk, in the form of a currency risk, it is likely to work in favor of Indians, especially with regard to investments denominated in USD and in Euros. . Investments of up to $ 250,000 per year are permitted. If you are investing in US stocks, make reasonably large investments at a time, as banks charge a large commission for converting Indian currency to foreign currency.
The author is CEO of Tarheel Consultancy Services