Best way to invest a windfall gain ?

POSTED BY Nagesh Kamath ON January 14, 2014 12:00 pm COMMENTS (17)

Recently got an old settlement of a good sum and would like to invest this amount but am not sure where I should invest. My age is 43 and the possible investment options are : A second home , NHAI Tax Free Bonds – 15 years, Mutual Fund – split between equity and debt, Bank FD etc. I do not have any immediate need of these funds and hence would like to invest for a long term for me and my wife’s retirement planning.  await your views.

17 replies on this article “Best way to invest a windfall gain ?”

  1. vijay says:

    oops…something ate up my last statement there –

    ….Typically, you’ll find examples where the short-term (~ 20-yrs), the REs have been no match at all to equity returns!

  2. vijay says:

    Just a couple days back I was reading an article on how over-stocked most Indian RE market is and how under-sold it remains. Some cities have >50% unsold inventory remaining. I’ll check and come back with the proper source of this info and appropriate referencing.

    The article claims there is enough stock to last 30-90 months (based on current absorption rate). With that background, I’d be a little weary of RE, but investment in commercial property is another ball-game, I guess.

    You may also have to give a thought to LTCG and its taxation. Particularly for RE.

    There have been articles that’ve compared RE vs Equities. Typically, you’ll find examples where the short-term (~ 20-yrs), the REs have been no match at all!

  3. rahul123 says:

    Hi Nagesh,

    Real estate is a good option (Even in current scenario). But i will advise you to buy an house (1bhk,~650 sq ft or less than it) in panvel. the advantage of buying 1 bhk is that, the cost is less, appreciation is much faster and you can sell it easily. for example,If the current cost of 1bhk is around 30lakhs then you can easily sell it for 40 lakhs after 3-5 years

    Thanks,
    Rahul

    1. Ashish Garg says:

      I agree with Rahul here.

      Buying a 1 BHK makes sense at least in Mumbai / Navi Mumbai market where real estate rates are really high as compared to some of the other metros. With rates going up (due to inflation, rising construction cost, rosy pictures whatsoever) even the developers are reducing the sizes so that the apartment still remain within the reach of buyer. So if you buy a 1BHK today, selling it at a later stage would be slightly easier than selling a 2/3 BHK due to overall cost. Also, 1BHK is not an unwanted category in Mumbai unlike Delhi / Bangalore, wherein people still look for a 2/3/4 BHK house.

      Ashish

  4. Paresh Shetiya says:

    Dear Nagesh,
    Real Estate may have been a good investment in the past, but don’t assume that values will automatically appreciate continuously. Even with rentals and tax benefits from loan, it may not be beneficial always.
    Refer this article published by me a few months ago and decide on investment in real estate thereafter…… http://www.investmentyogi.com/can-we-invest-in-property-in-todays-market/
    If you are convinced about the long term appreciation exceeding 12-13% pa (ie property rates doubling every 6 years or so), you may go ahead with the investment, otherwise better to avoid it.

    Paresh

  5. Nagesh Kamath says:

    I am thankful to all of you for you valuable comments. I have one thought though, some of my financial savvy friends recommend me to combine a bank loan and invest in real estate (flat) in an upcoming town e.g. Panvel (near Mumbai). Is real estate a good investment solution?. I am being advised that not only the value will appreciate, there will be rentals paid per month which should take care of the cost of maintaining the asset and the loan will give tax benefits.
    What are your views on real estate as an investment option apart from stocks and MF?

    1. anil says:

      Real estate rates in Panvel has gone up because of the upcoming new airport. Few clearance is still awaited , if by chance the airport doesn’t comes up then real estates rates in area surrounding Kharghar to Panvel will fall.

  6. vijay says:

    Why would you abandon the rupee cost averaging with a lump-sum investment? More so with the election round the corner.

  7. ashalanshu says:

    Dear Rahul, this is the most interesting disclosure from you that you are an active Derivative (FnO) player. I’m loving it.

    Thanks

    Ashal

  8. rahul123 says:

    Hi Kuntal,

    May be you are right, but you can see the trend from the numbers.

    Please keep an eye on the volumes on both the exchanges, Equity (NSE, BSE) and F&O (NSE).

    Thanks,
    Rahul

  9. kuntal says:

    Dear Rahul 123,
    All the best with your quick gambling, and all the best to those who take your comments in this forum seriously.

    Dear Nagesh,
    If you believe India will keep growing in long term (with a few hiccups now and then), then as per Ashal’s advice please invest 50:50 in equity & debt funds for long time.
    Thanks,
    Kuntal.

  10. rahul123 says:

    Hi Kuntal,

    I always believe that, one should invest in stock market if he/she got extra money. Or the money left after meeting the financial goal, keeping money for contingency plan , insurance and saving some cash.

    The financial solution and need is different for different individuals.

    Equity/commodity/forex/derivatives all are risky…..Time factor/volatilty(standard deviation is irrelevant… i can argue on this)…i will club all of them in one basket…
    In derivatives returns/loss will be fast , but the result will be immediate. In equity the result will take some time, so if somebody want to gamble , get the results quickly 🙂

    I believe equity market is same as gambling…nobody can predict the correct future value of any stocks with any financial model….i prefer derivatives and so far am very successful in it 🙂

    Thanks,
    Rahul

  11. rahul123 says:

    Give a thought to this…

    Invest 85% in FD and explore the world of derivatives with 15% amount….

    Thanks,
    Rahul

    1. kuntal says:

      Hi Rahul,
      You seem to always suggest that equity (even in long term SIP in diversified funds) is risky, and on the other hand are suggesting to “explore the world of derivatives”!!
      Which do you think is riskier?
      Kuntal.

  12. ashalanshu says:

    Dear Nagesh, if you are Ok with 50-50 thing, go and invest in lump sum in Eq. MFs and Debt funds of your choice. Please stay invested for next 20-25Y to reap the rewards of your hard work.

    Thanks

    Ashal

  13. Nagesh Kamath says:

    i am ok at 50 – 50 for equity and debt

  14. ashalanshu says:

    Dear Nagesh, what is your comfort zone for investing this money say 20-80% in Eq.-Debt or 30-70 or 40-60 or 50-50 or 60-40 or 70-30?

    thanks

    Ashal

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