Alternative investment to Gold to generate Real Return...

 

We Indians are obsessed with gold with so much so that this has been creating additional demand of USD and thus putting additional pressure on Current Account Deficit (CAD).  The reasons are not far to see... Persistent high retail inflation for last 3-4 years, dismal performance of equities and not every one would be lucky in investment in cumbersome real estate. Investors just jump on the gold wagon to intuitively capitalise on trend of strengthening of USD against INR as well as global bull run in gold prices. Moreover it is easy to invest and hold gold on top of nobody is asking you to declare Permanent Account Number (PAN). All this has made Gold as a block buster product during these years as a preferred choice of investment.

 

However, gold as a hedge of uncertainty is now loosing its appeal. USA is now stabilising as reflected in latest data like employment generation & various points related to housing. Additionally, Euro zone will also be stabilising on the back of commitments of ECB " Whatever it takes". Japan has also embarked on the ambitious program to bring back the growth after more than lost decade. All this is going to bring down uncertainty associated with global growth. Thus Gold is going to loose its appeal of safe heaven investment.

 

Now, we have an investment theme of  persistent high retail inflation in India and consequently expected strengthening of USD against INR. This couple with reflation of the USA present an excellent opportunity to invest in the index funds of the US equities  to capture these twin themes. 

 

There are several mutual funds which are offering these products. One should take caution to invest only in Index products linked to Dow Jones or S&P 500. This is an ideal way to take exposure to US equities while eliminating fund manager's bias in an actively managed funds. In addition, index funds are least expensive in comparison to other actively managed funds.

 

Last but not least, it is paramount to keep an eye on the development in financial markets to track inflection point and performance of the fund. This will ensure to take home decent return.

 

Tracking of performance can be done by reading business dailies on regular basis as well as making oneself literate about factors and trends which moves the market..