Wednesday, June 25, 2008

Hedge your investments

With spiraling oil price followed by inflation is taking toll not only on your monthly budget but on your investments and future investment options. In India the current inflation rate declared a week ago is around 11.05% . Mind you this is based on taking the price hike of few specific commodities, metal and oil prices (edible and fuel both). But the actual rate of inflation varies from city to city and depending upon quantum and type of individual consumption. The inflationary pressures are maximum on the labor forces of unorganized sector. Here in India they comprise 92% of total work force, they are deprived of the automatic adjustment of dearness allowance on the pay with the rate of inflation as available in organized sector. However, the mass in the lower rung of working class are not bothered about investment and portfolio management and safeguard their investments against inflation. It is only the people middle class whether professional, businessmen or service holders in organized sector those who have surplus fund to save and invest, should be cautious for their invested funds should not erode value. This is because the current rate of interest maximum 9% is far lesser than the rate of inflation, as such in real terms their money is losing its worth. Here is some measures suggested to safe guard your fund against inflation.

In the current scenario, you should review your portfolio and financial plans. You may need to shuffle your portfolio in a way so that it yields inflation-adjusted returns. You should avoid illiquid assets with fixed returns since they restrict generate higher return. How you adjust it depends upon your risk appetite, current and future financial needs. Weigh them carefully then scrutinize the available options. Never put all the eggs in one basket, this is especially applicable to those who invest in shares and stocks. In fact, investment in good companies in different sectors, taking into account their near and far prospects, at the current lower prices (which is attractive for many stocks and may go further down in near future), is not a bad proposition. Better to go slow, keep watching the market, you never know when market is truly touching the bottom. Since that is wild goose chase for general investors, better buy few scrip’s every month when you find the price is attractive and for that first you have to select few scrip and watch their price movements daily. Read those financial journal or log into the investment Guru`s web site for in-depth information of any particular company, you are eyeing upon

When you feel that your current investments are not yielding proper returns, go for the options available with avenues where the risk and return are different from your existing investments. Say, you can think of shifting your invested funds from equity market to commodity market or switch over to bullions. Even Banks are also mulling for a interest rate hike from Jul 01, that case , take premature encashment of your existing bank fixed deposits and re-invest them for long term. Because, the financial Gurus, say that the inflation will range between5-6.5% in 2nd quarter of 2009 and then rate of interest may come down again. Your long term deposits will enjoy the benefits then.


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