INVESTMENT DECISIONS IN INFLATIONARY ECONOMY: OPTIMISING RETURNS ON INVESTMENT
What is  INFLATION ? <ul><li>INFLATION   is a rise in the general level of prices of goods and services in an economy over...
Effects of Inflation <ul><li>High Prices </li></ul><ul><li>Reduced Savings </li></ul><ul><li>Excessive flow of cash </li><...
The Industry Perspective <ul><li>Inflation starts after the recovery phase. </li></ul><ul><li>Leading to prosperity </li><...
Individual – Investment Decision <ul><li>Examine the technical & Fundamental for a particular company/ Industry/ Sectors <...
AFFECT ON COMMON MAN <ul><li>Cost Increases:  Food, energy and other products increase in price </li></ul><ul><li>Investme...
Impact on Various Income level Groups
INFLATION PROTECTED INVESTMENTS <ul><li>Equity Mutual Funds </li></ul><ul><ul><li>Could form the Core ‘RISK’ portfolio for...
<ul><li>Gold/Gold ETF </li></ul><ul><ul><li>Open-ended funds that track the spot prices of gold. </li></ul></ul><ul><ul><l...
<ul><li>TIPS (Treasury Inflation-protected Securities) </li></ul><ul><ul><li>U.S. government bonds which were first doled ...
<ul><li>Corporate Inflation - Adjusted Bonds </li></ul><ul><ul><li>A great new way to combat inflation </li></ul></ul><ul>...
RECOMMENDATIONS <ul><li>Invest for maximum total real return </li></ul><ul><li>Invest — don’t trade or speculate </li></ul...
Inflation or Deflation?  Economic predictions for 2009 and beyond.  <ul><li>Deflation for 12 months then a massive amount ...
 
Upcoming SlideShare
Loading in …5
×

Investment Decisions In Inflationary Economy

793 views

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
793
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
30
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Investment Decisions In Inflationary Economy

  1. 1. INVESTMENT DECISIONS IN INFLATIONARY ECONOMY: OPTIMISING RETURNS ON INVESTMENT
  2. 2. What is INFLATION ? <ul><li>INFLATION is a rise in the general level of prices of goods and services in an economy over a period of time. </li></ul><ul><li>OR </li></ul>An increase in prices that makes a “UNIT” of goods and services more expensive over time.
  3. 3. Effects of Inflation <ul><li>High Prices </li></ul><ul><li>Reduced Savings </li></ul><ul><li>Excessive flow of cash </li></ul><ul><li>Increased Supply </li></ul><ul><li>Reducing Demand </li></ul><ul><li>More Jobs </li></ul><ul><li>High Lending Rates </li></ul><ul><li>CRR Increased </li></ul>
  4. 4. The Industry Perspective <ul><li>Inflation starts after the recovery phase. </li></ul><ul><li>Leading to prosperity </li></ul><ul><li>Good time for businesses </li></ul><ul><li>Profits starts increasing </li></ul><ul><li>Production increases </li></ul><ul><li>Hence employment increases </li></ul><ul><li>So does income </li></ul>
  5. 5. Individual – Investment Decision <ul><li>Examine the technical & Fundamental for a particular company/ Industry/ Sectors </li></ul><ul><li>Put the extra money in the share market which individual can loss without any impact on day to day life. </li></ul><ul><li>Find opportunities in “Defensive” sector </li></ul><ul><li>Invest in corporate bond fund </li></ul><ul><li>Deal in ETF’s </li></ul><ul><li>Play in Money market account & CD’s </li></ul>
  6. 6. AFFECT ON COMMON MAN <ul><li>Cost Increases: Food, energy and other products increase in price </li></ul><ul><li>Investment returns: Inflation can knock your investment returns. </li></ul><ul><li>Cost cutting by companies: Downsizing becomes a regular part of the job picture </li></ul><ul><li>Infrastructure development: Governments slow their projects </li></ul><ul><li>Higher taxes </li></ul>
  7. 7. Impact on Various Income level Groups
  8. 8. INFLATION PROTECTED INVESTMENTS <ul><li>Equity Mutual Funds </li></ul><ul><ul><li>Could form the Core ‘RISK’ portfolio for any investor </li></ul></ul><ul><ul><li>Tax efficient - Dividends are tax-free and long term Capital Gains is tax-exempt </li></ul></ul><ul><ul><li>Convenient to invest – as Lumpsum or through a Systematic Investment Plan (SIP) </li></ul></ul><ul><ul><li>Highest returns if you’re in for the long haul . </li></ul></ul>
  9. 9. <ul><li>Gold/Gold ETF </li></ul><ul><ul><li>Open-ended funds that track the spot prices of gold. </li></ul></ul><ul><ul><li>First launched in March 2003 on the Australian Stock Exchange under Gold Bullion Securities </li></ul></ul><ul><ul><li>Generally done for the diversification of portfolio </li></ul></ul><ul><ul><li>Not much popular yet </li></ul></ul><ul><ul><li>Launched in India in March 2007 </li></ul></ul><ul><ul><li>Real Estate Products </li></ul></ul><ul><ul><li>Historically effective hedge against Inflation </li></ul></ul><ul><ul><li>Invest in Real Estate projects and provide you with an opportunity to participate in developer’s returns. </li></ul></ul><ul><ul><li>Closed –ended with very low Liquidity </li></ul></ul><ul><ul><li>Returns are not tax-free </li></ul></ul><ul><ul><li>Example – HDFC Real Estate PMS. </li></ul></ul>
  10. 10. <ul><li>TIPS (Treasury Inflation-protected Securities) </li></ul><ul><ul><li>U.S. government bonds which were first doled out in the year 1997 </li></ul></ul><ul><ul><li>Principal is adjusted to the Consumer Price Index, </li></ul></ul><ul><ul><li>Almost risk-free </li></ul></ul><ul><ul><li>Value goes up when inflation rises </li></ul></ul><ul><li>REITs (Real-Estate Investment Trusts) </li></ul><ul><ul><li>Work under the premise that the commercial rents of the properties always go up with inflation. </li></ul></ul><ul><ul><li>Vanguard REIT Index Fund. </li></ul></ul>
  11. 11. <ul><li>Corporate Inflation - Adjusted Bonds </li></ul><ul><ul><li>A great new way to combat inflation </li></ul></ul><ul><ul><li>Purported to be better than the TIPS </li></ul></ul><ul><ul><li>Household Finance, a subsidiary of HSBC, issued inflation-adjusted bonds in November, 08 carrying an initial coupon of 4.49%. One is an inflation adjustment of 2.32%, other component is the real coupon, which stays constant at 2.17% </li></ul></ul><ul><li>Art Funds </li></ul><ul><ul><li>Have been offered in the past </li></ul></ul><ul><ul><li>Now not available as SEBI has to formulate guidelines </li></ul></ul><ul><ul><li>Osian’s Art Fund, Yatra art Fund </li></ul></ul>
  12. 12. RECOMMENDATIONS <ul><li>Invest for maximum total real return </li></ul><ul><li>Invest — don’t trade or speculate </li></ul><ul><li>Remain flexible and open-minded about types of investment </li></ul><ul><li>Buy low </li></ul><ul><li>Diversify </li></ul>
  13. 13. Inflation or Deflation? Economic predictions for 2009 and beyond. <ul><li>Deflation for 12 months then a massive amount of inflation due to zero rates, printing money/t-bills plus Japanese and Chinese dollar holders dumping reserves and t-bills onto the market at whatever price they can get. </li></ul><ul><li>Interest rates will be held down because of on going financial crisis with banks and AIG. Only solution will be nationalization of them (just as it was the only solution in Sweden in early 90's and Asia in '98). </li></ul><ul><li>Watch the gold price. Is in a bear market now but will turn very quickly and shoot from $800 to $2000 over a few months. </li></ul>

×