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Check alternative investment options to help retail investors earn comfortable returns even when stock markets are volatile.
Market downturns are an opportunity to reassess and realign financial strategies.
When the stock markets tumble, it can leave retail investors feeling anxious and uncertain about their portfolios. However, market downturns are also an opportunity to reassess and realign financial strategies. Here are alternative investment options to help retail investors earn comfortable returns even when stock markets are volatile.
1. Fixed Deposits (FDs) for Safety
Why Consider? Fixed deposits offer guaranteed returns and are unaffected by stock market fluctuations, making them ideal during market downturns.
Current Scenario: With rising interest rates in India, banks and financial institutions are offering better FD rates, sometimes reaching up to 8% per annum.
Ideal for: Conservative investors or those nearing retirement who prioritise capital preservation.
2. Debt Mutual Funds for Steady Returns
Why Consider? Debt mutual funds invest in bonds, government securities, and corporate debt, providing a balance of safety and returns.
Risk Profile: While not completely risk-free, debt funds generally experience lower volatility than equities.
Options: Liquid funds and short-term bond funds are recommended for investors looking for returns without long-term lock-in periods. Yields typically range from 5% to 7%, depending on market conditions.
3. Government-backed Small Savings Schemes
Why Consider? Schemes like the Public Provident Fund (PPF) and National Savings Certificates (NSC) offer attractive, tax-free returns.
Returns: PPF, for instance, offers an interest rate of around 7.1%, with a 15-year lock-in period but tax-free maturity benefits.
Other Options: Consider the Senior Citizens Savings Scheme (SCSS) if you’re a senior, with returns of up to 8%.
4. Real Estate Investment Opportunities
Why Consider? Property prices in some regions have stabilised, creating favorable conditions for long-term investments in real estate. Rental yields provide a steady income stream.
Alternative Option: Real Estate Investment Trusts (REITs) offer a more liquid, lower-investment entry into real estate, with yields averaging around 6%-8%.
5. Gold Investments as a Hedge Against Market Volatility
Why Consider? Gold has historically been a safe haven during economic downturns and a hedge against inflation.
Options: Gold ETFs and sovereign gold bonds (SGBs) allow you to invest in gold without physically holding it, while offering returns linked to gold prices.
Returns Potential: Gold has averaged 8%-10% returns over the past decade, though actual performance varies with market conditions.
6. Dividend Stocks for Income Stability
Why Consider? Dividend-paying stocks are less volatile than growth stocks and provide income even during bear markets.
Selection Tip: Look for large-cap companies with a history of consistent dividends. Sectors like utilities, consumer goods, and pharmaceuticals tend to have reliable dividend payers.
7. Systematic Investment Plans (SIPs) in Mutual Funds
Why Consider? SIPs in equity mutual funds allow you to invest a fixed amount regularly, spreading out risk and taking advantage of market dips to acquire units at lower prices.
Market Volatility Advantage: With SIPs, investors benefit from rupee cost averaging, which mitigates the impact of market fluctuations.
8. Corporate Bonds for Fixed Income
Why Consider? Corporate bonds, particularly AAA-rated ones, offer fixed interest rates and are relatively safe, especially when issued by financially sound companies.
Current Yields: Corporate bonds can yield anywhere from 7% to 9%, depending on the issuer and bond duration.
Risk Profile: Check the bond ratings to ensure the issuer’s creditworthiness and be mindful of lock-in periods.
9. Hybrid Mutual Funds for a Balanced Approach
Why Consider? Hybrid funds allocate assets to both equity and debt, providing growth potential along with capital protection.
Ideal Choice: Balanced Advantage Funds (BAFs) adjust their equity and debt allocations based on market conditions, which can be advantageous during uncertain times.
10. Alternative Investments: Peer-to-Peer Lending
Why Consider? Peer-to-peer (P2P) lending platforms connect lenders with borrowers, offering a potential for high returns with calculated risk.
Potential Returns: Returns in P2P lending can range from 10% to 15%, but investors should conduct thorough research before committing.
While the stock market may be experiencing turbulence, retail investors have various options to diversify and earn comfortable returns. A balanced approach, combining safe-haven investments like FDs or government-backed schemes with moderate-risk options like debt funds and corporate bonds, can safeguard your portfolio.
Disclaimer: Users are advised to check with certified experts before taking any investment decisions.
