Some tips to seek low risk returns
This leads to a question that in a world where many safe havens are not so safe, where can one invest money to earn respectable, relatively low risk returns? It will obviously depend a lot on the investor's preference, risk tolerance, liquidity needs and so on. Here are a few tips:
Traditional investment avenues like bank FDs and post office deposits provide a stable and secured investment avenue. However, they do not provide positive return after adjusting for inflation.
You can invest in deposits of reputed companies (that have high rating like 'AAA') for shorter term duration, that is, around one to two years with periodic interest payout. This can provide you better returns and liquidity too.
Stocks that are reasonably priced and have a high or medium dividend yield are a relatively safer bet. This will help you to earn some returns even in case there is no capital appreciation.
Having gold in your investment portfolio is advisable, however, the percentage of the same in your portfolio should not be more than 5 to 10 per cent. It's a hedge against extreme events and is a great diversifier in an asset portfolio, being totally unrelated to stocks and bonds. It provides a hedge against inflation.
Having liquid investments such as bank fixed deposits or liquid funds makes sense. Despite the lower returns, these investments gives you flexibility and the capacity to move when some of the current elevated asset prices drop to attractive level.
Do not have a very heavy exposure to real estate as they have low liquidity and involve high investment amount.
It is important to keep a diversified portfolio. The current volatility is likely to continue especially as the world is getting closer and domestic economy is affected by events in the external world. The recent drop in gold prices should not make you totally stay away from gold. Having a balanced and diversified portfolio can help protect your hard-earned money and grow it in a relatively low risk manner.