Any Guide about good investments should consider how the economic scenario is likely to be in the global market and what exogenous events and uncertainties are likely to prevail in the future. Even though these events can only be anticipated they are self-fulfilling. The important factors to look out for are:-Parliamentary elections, U.S FED tampering, interest rate and inflation rate. In short the overall macroeconomic situation has to be analyzed and its effects on growth, employment and other real variables will shape up the decision of choosing a good investment. The guides are as follows:-
- RETAIL SECTOR – Retail investors have been facing high inflation and negative real returns from both physical and financial assets.2014 does not seem to guarantee any such improvement specially if FDI(Foreign Direct Investment)is not allowed in developing countries it could prove to hamper growth and thus investments would seem less profitable.
- EQUITY – The equity market seems positive especially after the exit polls show the government coming to power after elections favoring development. It also shows a positive sign for exporters and thus an improvement in net exports of the country.
- DEBT – It seems positive if economy revives after the polls but negative if investors pull out. So a clear green signal is not available here rather it has to be closely monitored. But it promises high-yield returns to new investors or new comers, negative to existing investors.
- GOLD – Seen as the most lucrative investment till date, investment here seems positive if the governments around the world relax import restrictions and moves towards a policy of greater integration facilitating globalization.
- REAL ESTATE – the most widely fluctuating sector which saw the bubble burst in 2007 but again in 2009 due to recession world over found it difficult to curb negative impacts. It seems positive depending on the type of government which comes to power after elections. Prices are likely to ease as construction cost eases. But it is negative if the home currency weakens that is depreciating and if interest rates are likely to rise which will depend upon the policy mix of the Central Bank of the respective country. A tight monetary policy sees interest rate rising and therefore investment negative.
Suggestions to investors would be to follow a bottoms-up approach and invest in companies only after considering long-term perspectives and not be driven by just big numbers. Stability always wins over Volatility thus choosing a Co. which promises product development, market penetration and diversification is the key to look out for.