Investors are navigating challenging market conditions with traditional investment options offering limited appeal. According to reports from Mint, fixed deposits offered by PSU and private banks are currently yielding around 6% to 7.5%, which many investors may find unattractive. Small finance banks are offering higher returns of nearly 8.5%, but they come with relatively higher risk. The ongoing Middle-East crisis has created additional volatility in markets, making market-linked investments such as mutual funds less rewarding in the short term.
Gold, on the other hand, looks appealing, but soaring prices provide no entry point for investors. As reported by Mint, the absence of Sovereign Gold Bonds (SGBs) has left many investors uncertain about investing in digital gold due to the lack of clear regulatory safeguards. This has created additional confusion for investors seeking alternative investment options during the current market uncertainty.
In such uncertain market conditions, financial experts recommend sticking to a simple, disciplined investment approach. Avinash Luthria, SEBI Registered Investment Adviser at Fiduciaries, suggests a specific strategy for large lump-sum investments. According to Mint, he recommends putting half of it into an Arbitrage Fund as a long-term investment and investing the other half via a new 12-month SIP, in any Nifty 50 Index Fund.
Recent research by FundsIndia reveals the long-term performance of different asset classes over the past two decades. As reported by Mint, Indian equities delivered annual returns of 13.2% over 10 years, 11.3% over 15 years and 11.4% over 20 years. At this pace, investments would have multiplied roughly 3.5 times in 10 years, 5 times in 15 years and nearly 8.7 times over two decades. US equities performed even better, delivering annualised returns of 19.4% over 10 years, 19.8% over 15 years and 15.2% over a 20-year period.
The strategy comes with historical context of market volatility. According to Mint, the markets have witnessed at least two major crashes over the period that we are considering – 2008 and 2020. During the 2008 global financial crisis, Indian markets plunged over 50% as the collapse of Lehman Brothers triggered panic across global economies. In 2020, markets crashed nearly 40% within weeks due to Covid-19 fears and lockdowns. Despite these major corrections, markets have historically delivered positive returns for investors with sufficiently long time horizons.
