Invest or not in equity:
Invest or not in equity With high inflation, even the so-called risk-free investments are in danger of losing money. Experts say equities are a must in everybody’s portfolio to counter inflation. But the wild swings in stock markets are enough to scare investors away. Better way is Capital Protection Schemes
How it works?:
How it works? Suppose 80% of the corpus is put in AAA-rated bonds offering an interest rate of 8%. By the end of the 3 yr term, this debt portion would grow to the principal amount, thus ensuring that the capital is protected. The remaining 20% of the money is invested in equities to earn superior returns. The equity part is the icing on the cake
Pros :
Pros If the equity markets rise evenly at around 15%, the fund’s three-year annualised returns will go up to 9.2%. If the markets rise sharply and the equity portion doubles in three years, the overall annualised returns could go up to 12%. On the other hand, if the markets slide and the equity portion loses 50%, you still get around 10% absolute returns—or 3.3% per year.
Cons :
Cons However, getting your principal back after three years with a 3.3% return should not be seen as a big deal. Keep in mind that in three years, even 6%
inflation would reduce the value of the principal. So, if you get Rs 11,000 back you are actually getting about Rs 9,150. “Being closed-ended liquidity remains a key issue in these products,” Though the units are listed on the stock exchange, there are hardly any buyers or sellers. That makes exit before maturity nearly impossible. So, invest only if you are sure you won’t need the money before three years .