Investing is Simple…Really?

Investing, for some can be a pretty cumbersome task. Surprisingly, many professionals may also confess to being lazy in the “investing” department. Very often investment houses enthuse the dormant investors with a rendition of a very popular slogan, “You are working hard for money, but is your money working hard for you?” It’s the same old story that we hear over and over with excuses founded on busy schedules, daily routines of hectic work and simply put, no time. Many of us are comfortable just knowing that our monthly paycheck sits safely, resting in a bank savings account. Currently, the average savings accounts interest rate(s) are between 4% and 6% but are we really earning that interest? The Inflation Rate (Consumer Price Index) in India has been close to reaching double-digits since 2009. If we were to actually understand the ultimate net return on our savings, we would realize that it’s actually negative!

Source: International Monetary Fund, World Economic Outlook Database, April 2014

Source: International Monetary Fund, World Economic Outlook Database, April 2014

In India, there are two popular avenues of investment, bank deposits and gold. The annual bank fixed deposit rates for the past year have ranged between of 8% and 10%. Realizing that inflation is in fact eroding the returns does give cause to look for viable investment options. As per the latest World Gold Council report, India, for the first time lost its tag of the world’s largest gold consumer to China, who was reported to have 1,065.8 tons in 2013. The Indian government in order to reduce the large current account deficit, introduced a number of measures last year.  These measures are intended to curb the demand for gold, which is one of the country’s biggest imports.  However, it seems that this was only an initial check as the demand for gold is expected to be back on the rise this year. While a few see gold as an investment, many consumers merely hoard this commodity, thereby widening the deficit even further. As shared by my colleague, Jodie in an earlier post on Indexology, in 2013 gold lost 28.3%, the most in a single year since 1981, when gold lost 32.8%. Following this event, a recovery period for gold started, which lasted 25 years. If history it set to repeat itself as we have all come to believe it does in some form or fashion, there may be a long recovery period for gold to follow. However, much of this depends on the fundamentals of investing for today and the availability of investment options today which are supposed to make investing effortless and simple. Olympic Metals: Going For The GOLD?!

Source: Thomson Reuters GFMS, World Gold Council

Source: Thomson Reuters GFMS, World Gold Council

 

The posts on this blog are opinions, not advice. Please read our disclaimers.

2 thoughts on “Investing is Simple…Really?

  1. Anubhav Srivastava

    I believe Gold is a store of value or a global currency as it were. It preserves the value of savings. However, it does not help with increasing purchasing power or for purposes of retirement. To do that one has to mix international assets with traditional ones like gold, bank deposits and real estate in India.
    For historical fiscal reasons and for economic ones, Gold is unlikely to loose sheen in India and other asian countries. But investors have to look at equity markets to gain the extra bit to achieve their financial objectives.

    Reply
  2. Bhavikk Shah

    Hi Maam,
    Indeed a very informative article to read you have fantasticaly presented your views.. I liked it, and one thing is for sure India will never stop buying gold, its been estimated that India has around 20K tonnes of gold in house-holds,anyways, although Bank FD’s and Gold may not be a better option looking at the Inflation situtationsas of now, But one should also not miss-out to give a look at Equities.

    Equities are proven to be an instrument for protecting your purchasing power over a time. ArthVeda research shows that Rs. 100 invested in G-Sec bonds in 1999 would have become nearly Rs. 185 by 2012 end while price of a Rs. 100 commodity because of inflation would have become nearly Rs. 230 during the same period. This shows that the purchasing power of investor’s Rs. 100 has gone down over the period. And the Investor is able to buy only 0.8x of the commodity now or in other words his purchasing power is only 0.8x times now. Same Rs. 100 invested in Sensex or Nifty index would have become nearly Rs. 485 over the same period and the purchasing power would have gone nearly 2x. Therefore, equity exposure is also important to grow wealth….

    Here, I would like to recite the famous quote from the well known great Investor Mr. Warren Buffett, who often says, “You don’t need to be a rocket scientist. Investing is not a game where the guy with 160 IQ beats the guy with 130 IQ”. Investing is more about discipline and patience and less about speculation and trading. So do look at equities as a longer term investment and do invest in equities..

    Keep on sharing your thoughts Maam,
    Have a great day Ahead
    Regards
    Bhavikk Shah

    Reply

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