All that glitters is not gold

Falguni H Pandya, Sr. Assistant Professor VJIM, Hyderabad

     

It has been said by investment experts that return from conventional investment alternatives such as bank FD, Postal deposits and other money market instruments cannot even bit the inflation. Contrarily, investing in equities and market (Sensex and Nifty) are volatile and provide non linear return but offer the best return on an inflation adjusted basis over a long term. Therefore investors should not allocate more than 10% of their corpus in such conventional investment avenues.  There is flood of mutual fund schemes and other ETF funds which ensure the return parallel to Sensex and Nifty.

So, the all time ideal proportion advised by the investment experts is 80:10:10 meaning 80% of fund should go to the equity investment, 10% to bank FD and another 10% to gold.

Thanks to social media, easy and cheap internet, countless you tube videos to educate investors and mainly traders there are lots of changes in the market but the one thing which has remained permanent is ‘greed’.  In the long run, the stock market is the toughest place to make easy money.  For example, in 1992 Sensex  was 4285 and if one would have invested at that time, by 2022 it would have generated a return of 7.26%.  In that comparison bank FD would have provided 8.35% return.  In the first half of year 2023, Nifty has provided 5.83% return and Sensex has provided 6.32 % return, however the conventional asset class—Bank FD have outperformed stock market indices with returns above 6% for six months tenure.  Many small finance banks have provided better returns than well known private and public sector banks.  Everyone knows that bank FDs are risk-free investments class which are not affected by the volatility in the market.

There is record number of new traders and investors since 2019.  Despite the recent correction, there is overall a bullish trend in the market as Sensex and Nifty 50 rose 20 and 23% respectively in this year, but the reality is that less than 1% of active traders earn more return than bank FD rate.

    Falguni H Pandya, Sr. Assistant Professor, VJIM,