2014 marked a year of robust returns for shares in India, while debt gave steady returns and gold no returns at all. The Sensex gained 31 per cent, while the Nifty ended the year with 30 percent gains. Getting similar returns from shares in 2015 is an impossible task. Most of the good that is hoped for, from the Narendra Modi Government has already been factored in.
Partially book profit in shares on every rally
Partially book profits in shares from every rally. Very few analysts see a gain of over 10 per cent in equities this year. Buy on dips and sell on rallies would be the smart way out. So do not start chasing the markets at 29,000 and 30,000 points on the Sensex. Just wait to buy on declines and stay invested in cash when the markets are high.
Invest in debt instruments which have a longer term tenure
Invest in debt related instruments with a longer duration. So, invest in a bank fixed deposit for a 3-5 year term. This is because interest rates in the economy are slated to fall and by investing in debt for the longer term you are hedging against falling interest rates. So, if you have locked in deposit at a current rate of 9 per cent for three years, you couldn't care, if interest rates fall in the next one year. In fact, they are most likely to fall in 2015.
Partially diversify into gold
If there is a crisis around the globe, the first investment that rallies is gold. Therefore, the best strategy would be to invest partially in gold. Gold has gone nowhere in the last 2 years and there could be hopes of some rally in gold this year.
Costly real estate to go nowhere
Investment in real estate would depend on strategy in every state. For example, in Bengaluru the smart way would be to invest in land, as against flats. Land gives faster appreciation than flats. In Mumbai, investment in flats has given super returns in the past. So, study the markets well before investing in real estate.
Clearly, we continue to favor debt instruments over any other instruments, since at least your capital is protected. You can get good yields of up to 11 per cent in good company deposits. With WPI inflation running at near zero per cent, your real rate of returns from debt instruments continues to be high. On the other hand be smart enough to sell shares as and when you can.