How to invest in 2010 for better Profits?

This articles explores different investment avenues to invest in year 2010. Here are some excerpts from an article published in Sify.com.

Equities - Consolidation time

Making good money in Equities is going to be tough in 2010 when compared to the phenominal profits it gave in 2009. Year 2010 will be a consolidation year for equities and investors should do good research and home work before investion and should invest in specific stocks that focus on domestic consumptions (that too urban consumption) and have less exposure to global markets.

Direct equity investors would have to follow a bottom-up approach. Selection of stocks will be an important. Stocks with low price-earning ratio and good business models are likely to do much better.

Investors in mutual fund schemes through systematic investment plans (SIPs) should continue their investments. Some of them can book profits from their large-cap schemes (if they have invested for more than a year, they can avoid the short-term capital gains tax as well) and shift the money to mid-cap schemes. But one should look at the track record of the various schemes before doing so.

Debt – Improved returns

Returns from debt instruments in 2010 will be much more attractive than they were in 2009. The RBI has already signalled a higher interest rate regime because of inflationary pressures. “Interest rates are likely to go up. RBI may take the initial steps in January itself and continue the tightening process during the year,” said Murthy Nagarajan, head, fixed income, Mirae Asset (India). As a result, returns from liquid, ultra short-term and short-term debt funds could increase to 6 per cent compared with the current range of 4.5-5 per cent.

Gold: Continues to shine

In the last two years, the yellow metal has given 24.19 per cent annual returns. In comparison, returns from the Sensex and the Nifty have been in the negative territory —7.20 per cent and 7.62 per cent, respectively.

A known hedge against inflation, gold is expected to remain stable in the coming year. Deutsche Bank and Birla Sun Life Distribution Company expect the price at around $1,200 an ounce, or Rs 56,112 (exchange rate of $1 = Rs 46.76), by the end of 2010. “We believe that gold will be reasonably stable through the year. Our 12-month target is $1,200 an ounce,” said Pankaj Narain, director and head, private clients, banking and investments, India at Deutsche Bank. It is currently trading around $1,093 (or Rs 51,108.68) an ounce.

Property: Wait and watch

Experts said the next few months could be crucial. “Things will change around February when buying from NRIs stop. One could get good deals then,” said Pranay Vakil, chairman, Knight Frank (India).

Investors in commercial property would do well to wait for a longer period. In many cities, oversupply is leading to depressed prices. Also, industries like information technology and business process outsourcing (BPO), which drive the demand for commercial property, are under pressure because of the hardening rupee.

A better proposition would be invest in a property that is already earning some rent. This would give an idea about the expected returns.

Source: http://sify.com/finance/adrenaline-rush-is-over-cheers-to-consolidation-news-default-jm5aOBcgfge.html