Byapaar.com – The Indian Business Blog

Finally the turbulence of politics is over with the UPA led by the Indian National Congress withstanding a tight no-confidence motion in the Lok Sabha on 22^nd July. The Left Front has been blocking almost all major reforms which are so badly needed to push the economy to the next level. It has been frustrating 4 years for both pro-reform Prime Minister Mr. Manmohan Singh and also the business community. Now that all is over, the UPA government is determined to push through reforms in many fields like insurance, telecom etc. despite the alarmingly high rate of inflation that stands @ 11.98% today!

High rate of inflation has also made the apex bank (Reserve bank of India) to raise interest and thereby make bank deposit attractive. On the other hand, the long bull run of the stock market also ended with the start of the turbulence of government instability and skyrocketing international fuel price.

So as an individual – where do I put my money? Most banks are offering an attractive 10% annual interest rate. But is it long lasting? Despite forecast of an economic slowdown, businesses remain upbeat on long-term economic prospect of the country.

So the ideal way to invest your money is to divide your funds and put them into both the markets. While it is not guaranteed that bank rates will always remain the same, one can not also say for sure when the equity/stock market is going to recover!

Fixed deposits are always safe bet and assure you a confirmed return upon completion of the maturity term. So if you have an expenditure plan in the immediate future, you can calculate how much you get out of fixed deposit and cover it without worrying about loosing. On the other hand, fixed deposit schemes are also good for retired people. They can safely cover their monthly or annual expenditures.

But one must be careful in choosing the term of fixed deposit schemes as they involve some risks such as different interest rates during the term and maturity period. Also long term deposits are susceptible to inflationary changes. Rates will increase as long as inflationary pressure is there, but it tends to decrease once the ghost of inflation is brought under control. So fixed deposits should comprise short to medium term investments.

On the other hand, everybody knows how volatile the stock market is! One should do some research on the market and buy value based stocks or equities on mutual funds only. It is an investment for long-term gain and if the market recovers quickly, then one can get hefty gains within a short period. Even if the market is down, one should never get depressed as in stock market there is always the light at the end of the tunnel.

So that’s my say on utilizing your hard earned money judiciously.