Ask our experts- February 2023

Investment queries

I am an SIP Investor with multiple SIP MF investments. I want to know what is the likelihood of a correction now that valuations are so high? – Ramesh Kumar, Delhi

Corrections are normal in markets. Corrections make the market healthier. It is difficult, almost impossible, to predict when exactly a correction will happen and how deep the correction will be. More often, than not, corrections are triggered by unexpected and unforeseen events. Expected events will always be discounted by the markets. It is important to remember that during the bull run of 2003-08, there were 3 corrections of more than 20 percent and 10 corrections of more than 10 percent. Investors who stayed invested and continued to invest during those periods of heightened volatility benefited substantially when the market returned to normalcy.

Gold and silver funds offer double-digit returns. Should I invest? – Deepthi Pradeep, Kollam

Though our long-term outlook on gold is positive, it would be advisable to invest only in dips as domestic gold prices are currently hovering at record highs. The outlook of silver is not as positive as gold.

 If your risk appetite is not suitable, it would be advisable to stay away from fresh investments.

 We suggest you discuss with your financial advisor before making any investments. You can also read our detailed commodity research report before investing in gold or silver.

I am a senior citizen. I have Rs.10 lakh lumpsum to invest. And have MF investments worth Rs.25 lakhs. As fixed deposit rates have gone up, with banks offering upwards of 7 percent on less than three-year tenure FDs. With the current market conditions should I look at bank FDs? – Ramanathan V, Coimbatore

As a senior citizen you will get the benefit of 0.5% higher interest rate than other depositors. As you mentioned short term fixed deposit currently providing 7%-8% for senior citizens. You have already invested Rs. 25 lakh in mutual fund investments so you may allocate Rs. 10 lakh in fixed deposit. If you have 5 years tenure and required regular income, then you may choose Senior Citizen Savings Scheme which is currently providing 8% interest rate.

What is the difference between ULIP and ELSS? – Sreenivasan M

ULIP is Unit linked Insurance plan which gives dual benefits of both life cover to financially protect the investor’s family and is also an investment tool to achieve long term financial goals. ELSS is a diversified equity mutual fund which gives tax benefits to the investor. There is a lock in period of 3 years for this investment.

 Both ULIP and ELSS are popular tax saving instruments under Sec 80 C of the Income Tax Act. Taxpayer can claim for a deduction up to Rs 1.5 lakhs from the taxable income under this section if he invests in these schemes.

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