Machibet777 Bet10 smart money moves for 2023

After a volatile year for stock markets, unexpectedly great returns from gold and property and tepid returns from debt instruments, investors are filled with cautious optimism about the new year. ET Wealth reached out to experts to know what investors should do in 2023 to get the most bang out of their bucks. Here’s what they have to say.1. Prepay home loan if holding surplus cashThe flurry of repo rate hikes have pushed up home loan rates from 6.7% in April to 8.65% now. If rates don’t come down, someone who took out a 20-year home loan at the beginning of 2022 at 6.7% will have to pay about 149 additional equated monthly instalments (EMIs).Analysts expect things to get worse before they get better. The Reserve Bank of India (RBI) may hike rates by another 25 basis points (bps) by March. If this happens, home loan rates could touch 9%.When rates go up, extending the tenure is the default response of lenders. But that is not possible if the tenure extends beyond the working years of the borrower. The borrower then has two options: Either increase the EMI or pay a lump-sum amount to reduce the tenure. medium96857275Experts say prepaying a home loan may be the best way to deploy surplus money right now. “If ‘a penny saved is a penny earned’, prepaying a home loan may be the best investment option available,” says Raj Khosla, managing director, MyMoneyMantra.com. Indeed, no other investment can yield better returns than the 8.5-9% interest saved on the home loan.It’s also a good idea to increase the EMI every year in line with an increase in income. This can have a dramatic impact on the loan tenure. If you take a home loan of Rs 50 lakh at 8.5% for 20 years, the EMI will be Rs 43,391. “But a 5% increase in the EMI every year will finish off the loan in a little over 12 years. Increasing the EMI by 10% every year, you can be debt free in less than 10 years,” says Khosla.However, do keep in mind the tax benefits on the home loan. The tax deduction on the home loan interest brings down the effective cost of the borrowing.2. Hike exposure to mid- and small-cap segmentsThe mid- and small-cap segments corrected sharply in 2022. Much of the froth has now been cleaned up. Trading at nearly 85 times earnings during the peak of 2021, the mid-cap index (Nifty Midcap 100) now trades at a sober 23.4 times. The mid-cap basket now retains only a modest premium over the frontline Nifty50 index (at 22.6 times earnings).Meanwhile, the small-cap index, which was hovering at 65 times earnings at one point in 2021, is now valued at a more benign 16 times. Both indices are trading at a discount to their historical averages.Despite the sharp de-rating in broader indices, experts expect continued near-term pain for mid- and small-caps. Pankaj Tibrewal, senior fund manager, Kotak Mutual Fund, says, “We are recommending this space with at least a 3-5 year perspective as near-term volatility can’t be ruled out.”The froth in mid- and small-caps has dissipated medium96857650If interest rates stay high, valuations of some of the ‘growth’ stocks in this basket could get pulled down further. But any correction in this basket will also provide an opportunity to invest in quality businesses for the long term. Investors must use this window to hike presence in mid- and small-caps.“Testing times are great opportunities but it depends if you see the glass as half full or half empty,” remarks Tibrewal. He observes that in the past 20 years, through various crises and cycles, patient and disciplined investors have made good returns in this space.However, experts insist that investors must be very selective. Vikas Gupta, chief investment strategist, OmniScience Capital, reckons that returns from a well-selected basket of small-caps is likely to be lucrative given the large universe. But mid-cap selection is tougher because of the narrow universe of 150 stocks.3. Keep surplus handy to invest if market fallsThe stock market is expected to remain volatile in the coming months as the world grapples with uncertainties around recession, geopolitical tensions and Covid resurgence. Any sharp sell-off will be an opportunity for agile investors to buy at attractive prices. But the window may be open only briefly. Once any negatives are known and priced in, the market may quickly shift to ‘risk-on’ mode. The 2020 sell-off and ensuing rebound are good examples of how quickly the tide can turn.Here is what you can do: Identify pockets of surplus now that you can deploy when the time comes. Even a part of your existing portfolio can be liquidated to give you the necessary ammo when required. If falling short of liquidity, some of your debt funds or fixed income assets can provide the cash flow. But don’t stray too far from your desired asset allocation.Once you identify the surplus, earmark portions of it for staggered deployment at every market fall. For instance, If the market declines 20%, move 20% of the earmarked amount into equities. At 30% fall, investors may deploy another 30% of the earmarked amount. If the market dives below 40%, another 40% of the earmarked amount can be put into equities. The remaining 10% surplus may be deployed if the market falls beyond 50%. This is only an indicative plan and investors may identify their own thresholds and triggers.4. Lock in to high bond yieldsThe rate hikes of last year have pushed up the yields on bonds across maturities. However, experts insist that the room for a further uptick appears limited. Axis Mutual Fund observes in a note, “While we do not anticipate the end of the rate hike cycle just yet, market yields are unlikely to rise materially from here. Markets have priced in much of the incremental rate action.”For investors, this provides a small window of opportunity to lock in at high yields. Experts maintain accrual funds and target maturity bond funds are well-placed to make the most of the high yield environment. Liquid schemes, ultra-short-duration funds and low-duration funds are currently offering average yield-to-maturity of 7-7.3%. “Investors with shorter investment horizons and low-risk appetite should stick with liquid funds. With the increase in short-term interest rates, we should expect further improvement in potential returns from investments in liquid going forward,” asserts Pankaj Pathak, head - fixed income, Quantum Mutual Fund.Interest rates on saving bank accounts are just 3-4%, while liquid funds deliver higher returns. Therefore, liquid funds are a better place to park surplus funds. For longer time horizons, most advisers are recommending that investors target the 3-5 year maturity segment. This is where the risk-reward is most favourable. Puneet Pal, head - fixed income, PGIM India Mutual Fund, remarks, “We would recommend investors look at funds having duration of 3-4 years with predominant sovereign holdings as they offer a better risk reward currently.”Yields of all debt funds have improved medium96857944Murthy Nagarajan, head - fixed income, Tata Mutual Fund, says, “The 2-to-5-year segment is attractive due to higher accrual and scope for capital appreciation when the rate cut cycle starts after one year. Investors can look to invest in short-term, corporate bond and banking and PSU debt funds which invest predominantly in this segment.”If you want more predictable returns, target maturity bond funds are the best avenue. With yields across various maturities above 7%, there is a particularly compelling case for putting money in target maturity funds. These funds have fixed terms ranging from three to 15 years. Investors may target maturities aligned with the time horizon for specific goals. The only caveat is that you remain invested till the fund’s maturity, to fetch closer to the expected initial yield.Investors may even consider building a ladder of target maturity funds with yearly rungs — so that some portion of the portfolio matures each year. For instance, investors may currently target a five-step bond ladder spanning the 3-7 year maturity segment with funds maturing yearly from 2025 through 2029. A flattish yield curve in this segment — offering 7-7.5% — makes this very timely. Having such a ladder will offer visibility of returns for multiple years at a stretch.Alternatively, investors can create such a ladder by investing directly in government securities of any tenures of your choice. You can now do so by investing via the RBI retail direct platform.5. Gain from high rates on fixed depositsThe repo rate hikes in the past few months have seen banks raise their fixed deposit (FD) rates to attractive levels, surging from slightly above 5% in January this year, for longer tenures, to over 7% in December, with those for senior citizens touching 8.3%. While this may be the best time to lock your spare cash in long-term FDs for safety of capital and high returns, how do you deal with the problems of illiquidity, penalty on premature withdrawals and tax on interest income? Investing smartly and strategising can not only help you get higher returns, but also pay lower taxes and avoid penalties.Use laddering strategy: “Instead of depositing a large lump sum, split it into smaller deposits of varying tenures, with a defined purpose or financial goal for each deposit,” says Dinesh Rohira, CEO & founder, 5nance.com. This makes the investment more liquid, because if you have opted for a 5-year FD and require money after three years, you will have to pay a penalty of 0.5-1% to break the deposit. If, however, you have four smaller deposits with 1-, 2-, 3- and 4-year terms linked to specific goals, you will have the money when you need it without paying the penalty. You can also benefit from rising interest rates by using this strategy because a shorter term FD can be locked into a higher rate after it matures, instead of locking in a large sum for a longer period at a lower interest rate.Use family to lower tax: If your parents or adult children do not fall in the tax bracket due to low income, you can invest in FDs on their behalf and not only earn a higher interest rate — senior citizens earn an interest that is 25-75bps higher — but also save on tax. medium96858049 medium96858063Use sweep-in facility: This option allows any amount beyond a fixed threshold to be swept into fixed deposit, which not only earns you a higher interest, but if you want to withdraw money for an emergency, you will not be levied any penalty. “You can use these accounts for parking your emergency corpus since you can easily access the funds,” says Rohira.Opt for tax-saving FDs: A good way to reduce your tax liability is to opt for the 5-year tax saving FDs, which qualify for exemption of Rs 1.5 lakh under Section 80C.Use corporate FDs for higher interest: Certain companies and non-banking financial companies (NBFCs) offer deposits that not only come with higher interest rates than bank FDs, but also offer better liquidity due to simpler premature withdrawal terms. On the flip side, there may be a risk if you do not opt for a credible company, and these do not offer any tax benefits as do the 5-year tax-saving FDs from banks.Monthly income: “If your retired parents need a regular income and don’t want to invest in mutual funds, fixed deposits are a good option,” says Rohira. Opt for a non-cumulative fixed deposit, where the interest is not reinvested but paid out at predetermined intervals, be it monthly, quarterly, half-yearly or annually. The interest rate may be slightly lower than the cumulative deposit, where compounding till maturity increases the rate, but senior citizens will be assured peace of mind.6. Take advantage of sharp decline in US marketsThe US markets corrected sharply in 2022. The decline in big tech stocks led to a steep 33% fall in the US Nasdaq 100 index. The pace and ferocity of the US Federal Reserve’s hikes, together with earnings disappointments, dragged the market favourites down to earth. Experts maintain this correction should be seen as an opportunity for building long-term exposure to the US tech sector. “If one can tolerate uncertainty and volatility, this is the best time to allocate to technology,” insists Vikas Gupta, chief investment strategist, OmniScience Capital.The good news is that several mutual funds investing in foreign markets have opened up again for investors. Last year, Sebi had temporarily imposed restrictions on funds’ investments in overseas markets after these collectively breached the industry-wide cap for overseas investments. While the regulatory cap remains, the sharp correction in foreign markets has opened up space for additional investments, allowing funds to accept inflows. Particularly, investors in US-dedicated funds who couldn’t take advantage of the lower prices can now place their bets. This also serves as a timely moment for investors to moderate their domestic bias and diversify into foreign equities. Investing in the US markets allows local investors to bet on innovation and other value-generating themes not available in India. medium96858237However, experts warn against rushing headlong into the US market now that the gates have reopened. Mutual fund research outfit FundsIndia observes in a note, “While we believe this is a good time to start building exposure to Nasdaq 100 index, we would like to gradually build our exposure rather than go all in at this juncture.”Besides, investors also need to temper their return expectations. This will help avoid disappointment and untimely exits.Since the 2008-09 crash, the US markets enjoyed a largely uninterrupted bull run until recently. The mouth-watering returns of previous years were largely driven by the extremely low interest rates and very high liquidity facilitated by unabashed money printing by the Fed. But that phase of easy money is now over. As markets adjust to higher interest rates, returns are likely to moderate going forward. Therefore, investors should use this avenue more as a tool for diversifying out of the domestic market bias rather than trying to extract higher returns.7. Be prepared for medical contingenciesWith reports of a fresh surge in Covid cases, as well as outbreaks of measles and dengue in 2022, it is crucial to be prepared for medical contingencies this year. The two-fold preparation requires both financial and physical readiness. Besides adequate insurance and sufficient funds, you also need to plan the logistics of dealing with a medical emergency.“Not just Covid, but many post-Covid scenarios like long Covid and its side-effects have not been captured. The increased health concerns necessitate a bigger cover,” says Dinesh Rohira, CEO & founder, 5nance.com. This means that if you are less than 30 years old and live in a metro, you may need to upgrade from a Rs 5 lakh cover to a minimum of Rs 10 lakh basic indemnity plan. This amount should be increased with age, which means that those over 40 years old should have a Rs 15-20 lakh cover. Here’s how you can ensure sufficient insurance at optimum cost.Use maximum employer cover: Take the maximum cover that your employer provides, even if you have to pay extra, because it will still be 20-30% cheaper than the market plan. Also, if the plan covers your parents, you can reserve this for them and buy an independent plan for yourself and your family. “However, the employer’s plan may not be sufficient since high healthcare inflation means that normal treatment costs have become as high as the cost of surgical treatment. So, buy an independent cover as well,” says Sanjay Datta, chief, underwriting, claims & reinsurance, ICICI Lombard.Top-up plans: High protection, low cost medium96858263Buy a base and top-up plan: The best way to increase your cover size is to buy a small base plan and a bigger super top-up plan, since the latter will cost you much less compared to a bigger base plan. So, if you have a Rs 5 lakh plan, buy a Rs 20-25 lakh super top-up plan with a deductible of Rs 5 lakh. Top-up plans are also available as family floater covers, so you can insure your family members at a lower cost. Remember, however, not to include your parents as their age will push up the premium cost. Instead, buy your parents a separate base plan and super top-up cover.Keep a buffer amount: Even if you have adequate insurance that covers hospitalisation, there are several out-of-pocket expenses for which you should have ready cash. A buffer amount can also be useful if there is a delay or an issue in cashless reimbursement and you have to pay upfront at the time of admission.Besides insurance, you should also be ready for medical emergencies. Make sure you not only have mobile access to ambulance and doctor, but also have spouse’s, children’s or friends’ numbers on speed dial. You should also inform your partner or friend about bank details in case money is required urgently in an emergency. Besides, they should be aware of where your insurance and medical documents are stored. Ideally, these should be saved digitally on your phone and shared with a relative or friend.8. Try to create alternative sources of incomeWith the possibility of a slowdown and memory of massive job losses during the pandemic still fresh in the mind, it would be prudent to take pre-emptive steps to secure one’s income stream. While it helps to upskill and specialise in a manner that you become virtually indispensable for your employer, there is little you can do if a company is forced to downsize due to macro factors. Moonlighting is not an option in light of the large-scale layoffs by tech companies such as Wipro and Infosys in the past year, but there are other ways in which you can secure your future income. One is to practise a skill that can be kept as a backup and monetised at a later date. Two, freelance or find temporary work that does not breach your employment contract; and three, create an asset or leverage an existing asset to provide income.Create a backup source of income: “In the formal sector, there can only be one employment at any given time, but there can be various ways in which employees can have an alternative source of income as a backup,” says Neeti Sharma, senior vice-president, TeamLease Services.Practise your passion: Along with your primary job, you can keep honing your hobby or skill. “In the past two years, a lot of people have followed their passions, be it designing or cooking, and turned it into a business or kept it as a backup source of income,” says Sharma. It will take time to practise, build a network and establish a credible reputation, so if you haven’t already started working on it, do so now.Acquire ‘real-life’ skills: If you can acquire new skills in different verticals or develop expertise in a new field, you will have created a backup if you are laid off. “It’s not about doing an online course, but working on real-life skills to make them your income insurance policy. They may not pay immediately, but if you lose your job, you can depend on these to get a new one,” says Devashish Chakravarty, career coach, mentor & author of Yoursortinghat.com. For instance, if you are in print media, you could pick up designing and offer your services outside your company for free. You will be able to make contacts, create a network and a new line of expertise to fall back on.Use social media: You can also leverage social media, using it to propagate your skill, teach or even become an influencer, with the latter being paid well to project products or give feedback. This would again entail preparation and time to attract the required number of followers and start earning from the platform.Use gig platforms for primary skills: If your company permits, and you can freelance, teach or consult, you can do multiple projects and create several sources of income while being on the right side of law. Several gig platforms offer temporary jobs for freelancers and consultants without it impacting their primary jobs. Some such gig platforms include Workflexi.in, Jobs4her and smaller players like FlexiBees.Create or monetise an asset: “If you have high-order skills and can offer your services for a short duration to, say, a startup, in exchange for an asset such as stock or equity, you are creating an asset for yourself,” says Chakravarty. You could also monetise an asset such as property, or if you have a car, you could lease it to a car rental company, thereby creating an additional source of income.9. Take tactical exposure to gold and silverHyperinflation, geopolitical tensions and fears of Covid coming back created the perfect storm for gold and silver in 2022. The precious metals were the second best-performing assets during the year after real estate. Experts say the two metals will do well this year as well. “Our medium target of Rs 53,000 per 10 grams for gold and Rs 64,500 per kg for silver was achieved recently. We do see some signs of exhaustion in both metals but these dips could be used as buying opportunities by medium- to long-term investors for the target of Rs 58,000 in gold and Rs 82,000 in silver,” says Navneet Damani, senior vice-president, currency & commodity, Motilal Oswal Financial Services.Fears of a global economic recession will also keep gold prices buoyant in 2023. “Most forward-looking indicators are flashing recession signals. Manufacturing, housing and consumer sentiment in the US are showing signs of slowing. Unlike 2022, when the anticipation of a slowdown was celebrated by markets as a nudge for the Fed to turn dovish, 2023 will bring the slowdown into reality, hurting risk assets. The resulting risk aversion will be positive for gold,” says a note from Quantum Mutual Fund.It is, therefore, a good idea to take a tactical exposure to gold that is more than the 5-10% allocation in a diversified portfolio. Short-term investors (1-2 years) can go for gold exchange-traded funds (ETFs), which are very liquid and convenient.If your investment horizon is longer, sovereign gold bonds will be a better option because of the tax advantage and additional interest they provide.10. Stay away from fads if you value your moneyThe year 2022 was terrible for crypto investors. Even bluechips like Bitcoin and Ethereum slipped more than 60%, while smaller coins also saw their prices fall off the cliff. But they are still better off than investors in Luna, which crashed to zero in May. The RBI and Sebi have long washed their hands of cryptos, so investors have slim chances of recovering their losses.Don't expect a crypto bounceback in 2023 medium96858209The biggest shock for investors in India was last year’s budget, which rolled out very strict tax rules for cryptos. Income from crypto trading will be taxed at a flat rate of 30% irrespective of the income level of the investor. Worse, losses from one crypto can’t be adjusted against any other income or even the gains from another crypto. They cannot also be carried forward to subsequent years. Then there is a 1% TDS on all sale transactions. Though this will get adjusted against the total liability and can be claimed as a refund later, it will lock up liquidity. In just 200-300 trades, the entire capital will get locked up in TDS.In short, the government is saying what many financial advisers have been saying all along: stay away from fads if you value your money. There are other, simpler ways to make money than investing in virtual assets.We hope you find these smart moves useful in the New Year. Wishing you good health, prosperity and safety in 2023.