Savers dilemma: How to generate real return...

 

 

Savers are in consistent dilemma about how to generate real return for there long term savings. Financial planners are suggesting only way to generate real return through investment in equities. It is expected that you should invest early in equities & as you progress in the life, you should keep reducing the proportion in equities while raising fixed income to lock in return.  Is this the panacea of real return....

It is easier said and sold to the gullible investor than to achieve the desirable goal. To give an example, for last 5 year, Indian equities have give only 5% return. It is often cited that in the long term equities will always give real return. However, there are instances like in China, where returns are hardly to talk about despite superlative economic growth. 

 

The answer lies somewhere in between. One has to start investing only in diversified equity funds while not succumbing to the lure of sectoral / theme based funds as they will do well only when that theme is in vogue.

 

Another important thing a common investor is missing is to follow up after investing hard earned money. What a person can do is to at least read couple of economic dailies to keep oneself abreast with latest happenings and trends in the economic and global environment. This will assist you to decide when to encash your gains to lock the same in fixed income. Here again one should be practising Systematic Withdrawal Plan ( SWP).  It is a tool to keep withdrawing gains to invest in the fixed income assets to meet your financial goals. In fact financial planners mostly fails to emphasise on SWP as they are commission oriented to maintain your investment or try to switch to other equally risky investment. Therefore it is in your interest to understand when market is expensive in terms of valuation and it is time to encash gains.

 

Meanwhile as suggested in the last week that airlines will be doing creative crazy things to boost there coffers came alive. One of the airline has decided to price even middle seat as well. This means are they selling tickets to fly standing in the plane as one may not be willing to pay additional fee for seat..