What should you do with your money?

Blog is pleased to say it enjoyed a nice South Indian Deepavali holiday and as promised is back to give you some tips as to where to invest on the Lakshmi Pooja day and beyond.

I have always recommended Gold during the past few months as a good investment. Gold has an intrinsic value and is fairly secure. It is still a good place to invest, but hang on for a month before you rush to the gold shops. The Gold prices are falling as people are liquidating their Gold assets to cover their financial losses. This is likely to continue for a month more. Though i dont see the 25% fall in Gold prices as many had predicted, it can be safely assumed that the Gold will fall by 10% in November. So keep track of Gold rates in November and buy when it is around KD 5.300 - KD 5.600 per gram. This is in Kuwait. As usual, recommendation is not to buy ornamental gold, but gold biscuits or bars if you have the money. With Gold in short supply globally in the long run, you can expect the prices to revert back to the KD 7 plus per gram level by March 2009.

Real Estate is a strict no-no for now. The Real Estate prices have not fallen yet, but will definitely fall, though not to a great extend. You wont see much activity in this sector in India in the coming months. The only saving grace is the likely reduction of interest rates and the imminent fall in steel prices. These two augurs well if you are constructing a house or a commercial complex. But against this, your rental accruals are not likely to see any great appreciation and is likely to maintain the current level for a couple of years.

Equity - Surprisingly my recommendation is yes. I know the Sensex is steadily falling. But this is the right time to buy. Buy directly and buy solid blue chip shares with a successful track record and good management. You wont come to grief. You may have to hang on for 2-3 years, but you can expect a doubling of returns in 3 years, which at 30% plus per year is a superb investment. But beware, do not go in for mutual funds. Go by your gut feeling and pick the shares yourself.

The next option is to invest in debt instruments like Fixed Deposits in Banks. The interest rates are currently high and you will get a reasonable return, though the growth wont cover the inflation. But despite lot of Banks reporting huge losses due to fiscal profligacy, Government owned/backed banks are safe. In any case, in the current scenario, no Government can afford a Bank to go bust. So you are safe.

Why not withdraw the money as cash and keep it with you. I know you wont make it grow, but at least you dont have to lose sleep over whether it is safe! In these troubled times, able to sleep peacefully is the best you can hope for.