Investing advise from India

Last updated on Feb 27, 2009

Posted on Feb 27, 2009

Gautam Khandelwal helps his clients and friends with advise on stock trading, mutual funds, and investment.  With online stock trading becoming so popular in India, there has been a great proliferation of ordinary people investing everywhere.  Which has meant big stock losses as well.    Here is his advise at this juncture in the stock market.  Please so share your thoughts.

Gold has finally started creeping up.  My expectation is that with increasing uncertainties, gold should further go up and go up significantly. This is why young people have been reading articles similar to Learn To Trade offer to better understand the risk profiles of commodity investments, alongside a wide range of other investment opportunities. With trillions being pumped into the world, inflation should increase and gold and inflation are best friends.  However, any fresh exposure into gold may not be advisable.  Even if one wishes to take an exposure, take the SIP route. Further, it may make better sense to buy units of the DSP BlackRock Gold Fund (a fund that invests into equity shares of companies that mine gold) rather than buying paper / physical gold.

However, gold tends to be a safe bet as far as holding its value is concerned, so you may not want to put the brakes on just yet – especially if you’re reaching retirement and would like a little extra capital to play with. If you’re looking to supplement your retirement fund with gold investments, then IRA Investing has options that you may want to consider.

While government bonds have delivered stellar returns in the last few months, one should avoid this asset class as well, going forward.  Increasing government expenditure should raise yields (interest rates).  This will keep this asset class under check.

One asset class that looks really attractive at this stage are commodities.  All commodities have come down anywhere from 50 – 75%.  So it may be a great time to invest into commodities.  Besides, many governments have announced huge government expenditure packages and the building up of infrastructure.  Where is all this money going to go?  And then there is the Chinese demand.  The Chinese have increased their buying of commodities in the international market of late. In India, one could take an exposure into commodities either through the commodities exchange (which tends to be more complicated) or through mutual funds which invest into equity shares of companies that sell commodities and/or are into related sectors.

There are 2 such mutual funds – Mirae Asset Global Commodity Stocks and the Birla Sun Life Commodity Equities – Global Multi Commodity.  While the former invests in domestic and foreign equities, the Birla Fund invests only in international equities.  Also, the Birla Fund is invested heavily into gold companies.  Though I still believe that gold stocks should go up, it would be advisable to avoid them given the rally that gold has seen in the last few days.

One could take an exposure into Mirae Asset Global Commodity Stocks with about a 1-2 year time frame.  The least risky way of course is to run an SIP in the Fund.

Equities could be avoided for another few months.  Of course those who have SIPs running, pls let them go on.  Do not break them.

Your comments are most welcome.

DISCLAIMER: While I do not have any holdings in either of the commodities funds mentioned above, I do intend to take a big exposure in the  Mirae Asset Global Commodity Stocks.  Also, I have sizeable holdings in the DSP BlackRock Gold Fund and into government bonds.

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