RETURN: The highest return on investment has been real estate. Flats in gated colonies which were bought for Rs30-40 lakh are now valued at almost Rs1 crore plus, plus. However, at the present price of real estate you may have to think twice, as it may not increase as sharply as it has done in recent years.

By Arvind Pinto

In the light of the shortfall in fixed deposits and mutual fund rates and the high risk of investing in shares, the safest option for the middle class may be real estate and not gold itself but gold bonds…..

IN these uncertain times, when many have lost their jobs, others have taken a pay cut and still others whose have to make do with their pension, the fear of inflation looms large before us. For the government largess by way of introducing liquidity into the market, built on the premise that this with awaken the economy that was put to slumber during the dark Covid-19 days, has unfortunately reared the ugly head of inflation.
Ask any housewife and she will tell you that the prices of most daily commodities have risen anew. However, the income of the family has not risen correspondingly. With the consequence that the rupees in her purse continue to buy less goods – food and essential commodities each month.
Most senior citizens would remember the good old days when their savings would bring them interest rates ranging from 18 to 15 %. And if you were bold enough to invest your money in company fixed deposit, you could earn up to 24% interest. Many families lived on this interest.
Today with inflation as high as 5% ask any housewife who goes to the market for her daily shopping and she will tell you, where does one put one’s money to ensure that capital does not diminish while your lifestyle does?
The investments that you make can broadly be categorized into financial and non-financial. The financial products again can be subdivided into equity and debt. Non-financial products are physical assets – such as gold or real estate.
Let’s look at the non-financial products first. An Indian family that does not own gold is hard to find. For every woman on her marriage would be given gold and during her lifetime would buy gold ornaments on auspicious occasions such as birthdays, anniversaries and during Christmas or Diwali. Most families own gold in the form of ornaments. Gold is a good investment, but at Rs4,789 a gram, you will have to think twice before investing in gold. Further should you make ornaments like bangles or earrings, should you wish to sell them the jeweler would deduct around 10 to 15%. Gold does not earn you an interest. It is basically a dead investment and would only bring you money when you sell.
For those looking to invest in gold as also to earn interest, the Reserve Bank of India has a Sovereign Gold Bond Scheme. You can invest in these Gold Bonds that have a maturity period of eight years. The bonds may be redeemed at the prevailing price of gold. Since the price of gold increases each year, one can expect that at the end of eight years the redemption price will be higher than the price at which one had purchased these bonds. These gold bonds earn a nominal taxable interest of 2.5% per annum. Investing in these bonds is safer than physical gold, if one wishes to make an investment in gold
Another physical product is real estate. The prices of real estate have not come down in Goa, despite Covid-19. Real estate prices always tended to rise. However, selling real estate in today’s market appears difficult especially when there is more stock of units than there is demand. Many Goans working aboard have invested in flats and apartments in our cities. However, many of these flats are locked away, since many are scared of renting out their apartments, which tenants do not vacate when their tenancy ends. Court cases to evict tenants drag on for years. There are cases in our villages, where the caretaker who once looked after the property has usurped the entire property. Such is the sad state of our laws!


IN the case of financial products there are several options for the investor. Let’s begin with the equity market. The stock market is at its highest, with the Sensex touching 50,000. There are always stories of many who have made it big in the stock market, but stories of those who have lost in the stock market do not make headlines, since no one talks about losses. Probably if one is not a professional, the stock market is not everyone’s cup of tea.
One of the easy ways of reaping the benefits of the stock market is to buy mutual funds. These funds then invest in the market, while giving their holders capital appreciation or for those who require income, these funds have dividend schemes. If you have to make money with mutual funds, the key is knowing when to buy or sell a mutual funds. However, most banks and investment agents, pressurize their clients to buy into these funds, since this is where they commissions lie, but are too busy to tell you when to exit a particular fund!
For those who do not trust the stock market, there is always bank term deposits. However, today with banks awash with surplus funds that they are not willing to lend, the interest rate is down to 5% and below. Some of the smaller finance banks as also IDFC First Capital offer better interest rates. In order to ensure that you money gets the best deal it would be prudent to compare interest rates before opting for a bank. Do not invest in term deposit only because you have your savings account in a particular bank. You can always buy a term deposit and insist that the interest is credited to your particular saving bank account held in a different bank. While investing in a term deposit, remember to ensure whether you wish to have your funds reinvested or whether you wish the amount to be re-credited to your account on maturity. For at times, it does happen that on an automatic reinvestment, you may find that you receive a lower interest rate, since the tenure of your investment qualifies for a lower interest rate. Interest rates are dynamic, changing according to the liquidity ratio of the bank and the rates can rise or fall depending upon the bank’s operations. For senior citizens above the age of 60, there is the Senior Citizens Saving Scheme. This scheme gives a better rate of interest than the average bank interest rate. The maximum amount that can be invested in this scheme is Rs15 lakh. Many senior citizens seeking for a better interest rate could put their money into this scheme. The interest however is taxable.
One of the safer options for long term investment is the Public Provident Fund or other such funds. The benefit of the public provident fund is that the annual investment in these funds qualify for a tax deduction under section 80C. There is an upper limit of Rs1,50,000 per year, while the lower limit is Rs5,000. Till date, both the interest and principal are free of tax on withdrawal.
However, many of the new schemes of investment qualify for a deduction of tax, the amount that is payable on withdrawal qualifies for tax.
As inflation rises and the cost of our daily commodities get costlier, many of us with fixed incomes seek to make our hard-earned savings get better returns. Look at various investments before you choose the one that is best suited for both your risks and goals.
TALKING about investments, there are several Ponzi schemes with fanciful names and still showy promoters. These operate in Goa as also in many parts of the country. These schemes promise high rates of interest, as high as 25% together with both cash and physical presents to lure investors into their net. In these hard times of falling bank rates, many of us are tempted to invest in these schemes, hoping to double or even triple our money. Everyone who falls for these schemes is ultimately the loser, since all you ever get is a small enticement gift and interest for the first month if lucky. You stand to lose the entire money that you invest. Therefore, invest wisely if you wish to see your money give you some good returns.

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