Nov
28
2010

What should be your Investment Strategy for 2011?

An article by Varun Walia

If you have been through the grilling in the recent years, then just ask yourself one question. How your investment could have performed if they were allocated all across financial instruments such as stocks, bonds, money deposits and precious commodities?

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Minting Returns: A bigger challenge now

Even if you had not made much, still you could have easily escaped the stock market wrath. So, learn from the past mistakes and do not hesitate in starting afresh. Not just stock market investments, but all sources of unsecure returns present enormous challenges. Only fixed interest rate deposits are secure and can fetch miniscule returns. But, not everyone is attracted to the kind of returns generated through fixed income instruments, so a little extra risk taking remains the only alternative.

When focusing on 2011 investment plan, one thing is sure that it won’t be as easy as it was a decade ago. We are still struck amid uncertainty and safety is no where to be found in any sort of investment horizon. These are the times when without serious planning and a professional investment approach, money simply can’t be made.

Caution and Diversification: Best Approach for 2011 and Years to Follow

How to achieve the kind of diversification required surviving in years ahead? Well, if you are accustomed to different financial instruments then a simple advice is to take advantage of each of them in proportions suitable to your risk profile. Anyhow, if you don’t have the confidence and required knowledge of asset allocation, then you should not attempt to build your own investment plan. The best thing for you is to seek help of a certified investment advisor, but if you are not willing to pay hefty consultation fee for such services then there is another alternative.

Can Mutual Funds grow your Money in 2011 and beyond?

You can simply achieve your investment goals through mutual funds. The strategy is simple, Identify best performing funds with focus on different asset allocations, stocks, bonds, commodities and money market instruments.

It’s better to opt for funds that offer tax advantages. When opting for stocks related funds make sure that you pick the ones that provide your investments both domestic as well as international exposure. If you are a conservative type, then your focus should be on funds with higher dividend yield and the investment horizon must be longer than 3 years.

What to do if you are in Love with the Stock Markets?

This is not something uncommon. A large number of investors after tasting the returns from equities never invest elsewhere. As we all know, near term future of stock markets is really hard to predict under current economic conditions, so dealing with risks should be given highest priority while making an investment plan for 2011.

Simplest way of hedging your portfolio risks is by utilizing options. Don’t over hedge your positions through options as these are very risky class of derivative instruments. Times are not favorable for aggressive investors, so stay with blue chip names. But here too diversification strategy should not be ignored.