India markets close in 5 hours 53 minutes

From gold to mutual funds, 5 investment avenues to consider amid the Coronavirus crisis

Adhil Shetty
coronavirus, investment, investment avenues to consider amid Coronavirus crisis, mutual fund, gold, fixed deposit, Small saving schemes, PPF, NSC, Senior Citizens Savings Scheme, post office FDs, Sukanya Samriddhi Yojana

The ongoing coronavirus pandemic is a grave threat to not just the public's health but also their precious investments. The unprecedented city lockdowns and sealed borders have started impacting the global economy. Markets are extremely volatile, wiping out years of profits. The obvious question in every investor's mind at the moment is this: where can they park their money for the safety and growth of capital?

One thing is certain: panic is not a solution to the current challenges. You, as an investor, need to hold your nerves. You also need to stay away from rumours to make pragmatic decisions. If you're wondering where you can park your hard-earned money in such a time, here are a few products which you might find helpful.

1. Gold

The yellow metal is considered a safe haven for investors-the go-to option during periods of uncertainty or panic. In fact, gold prices have seen a jump of over 23% in the last 1 year. If you're looking at gold as an investment avenue, you would be well-advised to consider digital investment options to steer clear of purity, making charges, and safety concerns. Your options include gold mutual funds, gold exchange traded funds, and the Sovereign Gold Bonds. In fact, SGBs are great tools to ensure an additional, guaranteed interest income at the applicable rates compounded semi-annually over and above any capital appreciation. SGBs also provide tax-free redemption from the sixth year onwards making it better than the demat gold options. That being said, it would be best to ensure your gold investments do not exceed 5-10% of your portfolio's value; reasons being even gold prices can be volatile, apart from the fact that gold tends to flatline for long periods.

2. FDs and RDs

Fixed and recurring deposits are good investment options for risk-averse investors despite the recent drop in deposit rates following a series of repo rate cuts by the Reserve Bank of India. Deposits are secured investment options that usually fetch higher rates than a savings account. For additional capital safety, you may open deposits with banks with a good track record and low NPAs. Do note that FDs fetch slightly higher returns for senior citizen depositors and returns are taxable according to the applicable slab rate. Lastly, if you are planning to invest for a long to very long-term objective, you may opt for the FD laddering technique that can enhance your returns and ensure high liquidity at the same time.

3. Small saving schemes

Small saving schemes like the Public Provident Fund, National Savings Certificate, Senior Citizens Savings Scheme, post office FDs, Sukanya Samriddhi Yojana, etc. offer attractive interest rates. More importantly, small savings schemes come with a sovereign guarantee. Depending on your financial goals, liquidity requirement and investment tenure, you can select appropriate investment products under small savings schemes. Besides, these offer great tax deduction benefits that will majorly lower your tax burden.

4. Liquid funds

Amid the volatility in the market, you may consider parking a portion of your fund in liquid mutual funds and earn a moderate rate of return, which is comparable to the prevailing FD rates. In liquid funds, the corpus is invested in products like certificate of deposits, commercial papers, treasury bills, and securities with maturity periods up to 91 days. However, try to avoid liquid funds that have exposure in securities with poor credit ratings. Liquid funds are regarded as one of the most secure mutual fund investment options with ultra-short tenures that ensure high liquidity.

5. SIPs in equity mutual funds

The equity market is highly volatile, and most investors are currently experiencing a fall in the value of NAVs in their portfolio. However, if you are an existing investor, your SIP investments can help you accumulate mutual fund units at a very low NAV and reap the benefit of rupee cost averaging. If you are looking to start a new investment, SIPs can help you earn an attractive return in the long-term. That said, always invest in a mutual fund that has a stellar track record and high ratings and avoid SIPs in equity funds if you're looking to invest for a very short tenure.

Final thoughts

Before you start investing, it is essential to have clarity on investment purposes. Is it because your portfolio is in deep loss and you want to minimise the damage? Or is it because you see the current situation as an opportunity to earn outstanding returns in the long term? Or is it because you feel you should rebalance your portfolio to protect your investments from external shocks? Having clarity about investment purpose is crucial to chalk out pragmatic investment strategies. More importantly, ensure your investment decisions are strictly in line with your financial goals, risk appetite and liquidity requirements. When in doubt, don't hesitate to consult your financial advisor and avoid taking major investment decisions based on hearsay. The current coronavirus crisis demands calmer nerves than ever. So, stay away from rumours and stick to your financial goals when it comes to planning your investments.

(The author is CEO,