Fixed deposits vs stocks vs gold vs real estate: Here’s how much money to invest in these assets in FY24

Gold, fixed deposits (FDs) and real estate managed to outpace equities in the financial year 2023. Market watchers believe that rising interest rates brought FDs into the limelight again in the ongoing financial year, whereas looming uncertainty over inflation and recession in the global economies coupled with increasing borrowing costs pushed demand for the yellow metal higher in the past 12 months.

Data available with MCX showed that spot prices of gold in Ahmedabad soared by 14.31 per cent to Rs 58,661 on March 27, 2023 from Rs 51,317 on March 31, 2022. Likewise, data compiled by BankBazaar showed that fixed deposit rates of State Bank of India (SBI) for 3-5 years tenure increased to 6.5 per cent from 5.5 per cent during the same period. On the other hand, the benchmark equity index BSE Sensex declined 1.6 per cent in FY23 till March 27, 2023. The BSE Smallcap and BSE Midcap index also cracked 6.6 per cent and 2.3 per cent, respectively, during the same period.

Santosh Meena, Head of Research, Swastika Investmart believes that despite the ongoing market downturn, most of the negative impact on prices has already been factored in by investors.

Sharing his views on how high-net-worth individuals (HNIs) can allocate their funds in FY24, Meena said, “HNIs might think about putting a sizeable chunk of their portfolio into equities because these investments have the potential to produce better returns over the long term. As a general guideline, 40 per cent to 60 per cent of the portfolio should be allocated to equities. The percentage of debt in an investor's portfolio may range from 20 per cent to 40 per cent, depending on their risk tolerance and financial objectives. A typical rule of thumb is to allocate 5 per cent to 10 per cent of your portfolio to gold. Amounting 20 per cent–30 per cent of the investor's portfolio to real estate may be an option, depending on their financial status and investing objectives.”

Latest data from ANAROCK Research showed that average residential property prices across the top 7 cities increased in the range of 6-9 per cent in Q1 2023 when compared to Q12022, mainly due to an increase in the prices of construction raw materials and the overall rise in demand. MMR and Bangalore recorded the highest 9 per cent annual jump. Meanwhile, average rentals in commercial properties during the same period witnessed a rise of anywhere between 4-5 per cent across the top 7 cities.

On the other hand, Sonam Srivastava, smallcase manager and Founder of Wright Research recommended a customised investment portfolio that aligns with an investor’s risk tolerance and financial goals.

“While there is no one-size-fits-all approach, our general guidelines suggest that high net-worth investors allocate their investments across different asset classes. For equities, we suggest allocating between 40 to 60 per cent of the portfolio to equities, based on the investor’s risk tolerance and investment objectives,” Srivastava said adding to allocate 20 to 40 per cent of the portfolio to debt investments, such as bonds and fixed income instruments, depending on the investor’s income needs and risk tolerance.

She further advised allocating between 5 to 15 per cent of the portfolio to gold, which can provide a hedge against inflation and market volatility and 10 to 20 per cent of the portfolio to real estate which can provide steady rental income and long-term capital appreciation.

Amnish Aggarwal, Head of Research, Prabhudas Lilladher believes that it makes sense to lock fixed income instruments at current elevated interest rates.

For allocating funds in various asset classes, Gurmeet Singh Chawla, Director, Master Capital Services, who sees a 15-18 per cent upside in equities in FY24, said, “For HNIs, real estate and commodities, specifically metals and equities all hold the potential of attractive returns if consistency is maintained for longer periods. Real estate is not liquid. Equity is most liquid though the risk can be significant in adverse geopolitical situations, in the short run. Allocation of assets should always be based upon two factors. First, risk appetite and second the financial goal you aim to achieve through your investments.  So a wide range of factors need to be taken into account, including liquidity, risk tolerance and investment horizon for building a suitable portfolio.”

 

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