G sec and returns

While the existing equity (direct /mf) investors enjoy the market ride, the bench sitter’s are not sure about the future rally.

It is no doubt that the equity market  is heading for interesting times,but at the same time volatility will be  a part and parcel of the ride.If you are not keen to be on equity market where will you invest.The other options are gold,real estate and debt instruments.

After a spectacular rally over the past decade gold may need to take a little long breather before any meaningful rally. With no retail investment option in real estate investors should consider the debt investments for lower risk and high return over next  2-3 years.

In the past one year accrual products (interest )  are darling of the debt investors although  the real return was not good.But going forward  if the inflation tapers the charm  of the  accrual products will further go down.

If so what is the asset class that will deliver superior return over next 2-3 years.If you go through the gilt (government securities) cycles you will find some interesting trend that is building up.

The 10 year Government securities is quoting  above the long term average of 7.8 per cent.In the past 10 years only 14.3 % of the times that G sec was quoting at above  8.9 per cent. For the past one year G sec is quoting above this level and it means there is a near term possibility that yields are likely to go down and it will generate a healthy return for investors.

So if you have patience and ready for short term volatility add G sec to your portfolio.Whenever the G sec was quoting at 8.9 per cent in the subsequent year it has delivered 22 per cent with minimum of 7.6 per cent to maximum of 35 per cent.

If you are conservative investor wait for the monsoon to unfold but if you have risk taking ability jump now to enjoy the good ride after one year.

Have return target in mind and sell your G sec after a rally to protect your gains.

For any clarification feel free to write to suresh@myassetsconsolidation.com.