The covid-19 infections have bought with it a time of uncertainty that we have never seen before. Investment has become extremely difficult with falling stock prices, falling interest rates and real estate prices have also slumped. It is very difficult to invest in times like these. Here are 4 smart investment ideas, for astute investors, though they come with a degree of risk, especially if it is a stock.
1. Coal India
We are recommending to buy the shares of Coal India. For FY 2019-20, the company declared a dividend of Rs 12 per share. Based on the current price of Rs 132 for Coal India, the dividend yield translates to 9 per cent. State Bank of India gives you an interest rate of 5.70 per cent on its 1, 2 and 3 year fixed deposits, which makes the returns from Coal India by way of dividend much better.
The question that now arises would Coal India, continue to pay the same dividend. The company has not been too impacted by the Covid 19 infections. It is also a debt free cash rich company. Even if the business prospects change marginally and the company declares a dividend of Rs 10 per share for 2020-21, your dividend yield is pretty good. The stock is trading at near 52-week lows and should the stock markets recover, there could be significant gains for investors.
2. Fixed Deposits of LIC Housing
Fixed deposits from NBFCs are unsecure deposits. However, LIC Housing Finance deposits are AAA rated deposits and can be considered as relatively safe. The company gives an interest rate of 7.50 per cent on its deposits of 1-year, while the 4 and 5 year deposit offers an interest rate 7.60 per cent. However, it would not be prudent too invest for such a long period of 4 and 5 years.
With the backing of LIC, there are not too many risks in this investment. A good investment to lock your money, when interest rates are falling.
3. Public Provident Fund
Recently, interest rates were reduced on all the post office savings schemes. Accordingly, the interest rate on the PPF was reduced to 7.1 per cent. However, it is still a good 1 per cent more than what most banks in the country are offering.
PPF also offers tax savings under SEC80C of the Income Tax Act. Those who are unwilling to take a risk, could opt for the above. The safety is extremely high, given that these deposits are backed by the government of India.
4. Gilt Funds
Gilt Funds are part of mutual funds, which tend to put their money in government securities. Such Funds have given enormous returns in the past 1 -year. For example, SBI Magnum Gilt Fund has given returns of 15.73 per cent in the last 1 year. LIC MF Government Securities Fund has given a return of near 14 per cent. Almost all of the GILT Funds have given returns of around 11 to 15 per cent over the last 1 year.
However, there is always an element of risk in the returns, as they depend on which way interest rates in the economy move.
The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.