The Indians are in a dilema.
First, their savings have dwindled due to the spiralling inflation. And to add to their misery, they just dont have any avenues to invest and make the money grow.
Let us look at where people used to invest traditionally.
Gold - The Indians - rich or middle class or poor - always were crazy about Gold. But they always used to invest in the wrong gold tools - jewlellery. The best investment in gold is either gold bonds or 24 carat gold. But Gold has become prohibitively costly to the middle class and poor, and has ceased to be an option at all.
Real Estate - With land being scarce, and controlled by land mafia, people are wary of investing in land because of fear of reprisals from real estate lobbies and the mafia. Also, land prices are not going up, and hence there are hardly any returns short term. Then it is illiquid.
Stock Market - The stocks have been flat for while now, and is likely to be so till the next elections as this government doesnt invoke any confidence in the investors. Also, the small investors have been shortchanged and have been least protected. Insider trading is rampant, and FII's rule roost. Things are not all that rosy on the equity front. Stay out of stock market for now, unless you want to invest in blue chips or select stocks as a long term investment. But do a thorough research before you do so. And most middle class dont have the skill sets to do such a research.
Bank Fixed Deposits - This is apparently attractive as the interest rates have rised steadily. But, the interest rates are still less than the inflation, which means your net wealth is decreasing if you are investing in FD's or Debentures. With inflation showing no signs of receding, despite bountiful monsoon for the last two years, and this year (and government having no clue as to how to tackle the inflation), it just doesnt make sense to invest in any instrument which doesnt meet the hurdle rate of 18%, i.e if your investment is giving an annualized return of < 18%, your net wealth will erode.
So where does one invest?
A tricky question. But I think the only option is to think a bit aggressively as a venture capitalist, and invest in early growth companies that require funds. These could be your friends company that has a good idea, or some small private limited companies having a good product or service that is struggling for funds. The risk is higher, but then so will the returns. But do proper due diligence before you invest. On the flip side, the GDP is growing, and with higher lending rates prevalent, entrepreneurs are not keen on debt financing. Hence, there is an opportunity for you if you are smart. But spread your investment across three or more sectors and in different ventures.
Tough times call for innovative thinking. This is the time to think out of the box, and think differently, and to take a bit more risk.
