With interest rates exceptionally low and their hardening to generate “real” returns unlikely in the near term, investors have to look at diversified avenues in order to generate requisite risk-adjusted returns, said Varun Kapur Yes Bank Former President & Presently an Independent Investor.
Debt – As yields on bank fixed deposits are low, investors can look at InVITs, REITs, MLDs (Market Linked Debentures), NCDs as alternative instruments to generate returns well above FDs. Investors will need to consider ratings of these instruments, pedigree of the issuer, their most recent financial results, impact on covid/lockdowns on their business model among other factors before selecting the specific paper.
Balanced – While slightly riskier than conventional deposits and debt, investors can park some monies in arbitrage funds. Several AMCs offer well-run arb funds and returns have in general been higher than FDs.
Equities – Financial year 20-21 was exceptional for this asset class. In order to generate “real” returns, investors may need to create a well thought through equities portfolio. These investments can be split into 3 buckets: a) core investments – these will be fundamentally very sound companies which have the ware withal to withstand impacts of lockdowns and the covid crisis. Look for good management teams, sectors that are defensive, and results of Q3 and Q4 (FY21) reflecting possible turnarounds in the business.
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