If you are a habitual saver in fixed return instruments, my humble request—get over the fixed return fixation. The way the interest rates are hovering, this year will be one when rates will further fall. Those depending on PF returns experienced the lowering of rates last month and if you have not been closely observing, the small saving instruments are experiencing rate cuts each passing quarter.

Yes, there are proponents of the low rates, as they see it as a reason for economic growth because consumers take advantage of lower rates to finance their financial dreams like home purchases or businesses to expand operations and hire workers. Consequently, the economy should grow faster as low rates stimulate the economy. This is true theoretically. For every borrower who pays less in interest, there is a saver who receives less in interest income. In some ways, lower rates transfer wealth from savers to borrowers, which may or may not reflect in economic growth.

The situation for retirees and elderly is grim as they face the challenge of rising cost of living and diminishing returns from their choice of investments— fixed return investments. Unless you are a pensioner from the government of India, you have no way to manage the impact of lower rates on fixed return instruments and real inflation. For instance, healthcare is a large component of the expenses borne by the elderly, which does not keep up with the inflation figures released by the government, making life difficult for them.

Yes, it is risky to invest in equities and it is as risky as driving or walking on any city roads, going by the statistics around fatal accident in our country. That has not stopped people from walking or driving on roads. The same should be their approach to investing in equities. Today, there are really simple and easy to understand instruments that can be used to invest in equities. People with no exposure to equities are actually taking the biggest risk by staying away from equities.

And those who feel that retirees need to have their monies in safe debt and fixed return instruments— think twice. By doing so, they are not only going to receive less money by way of payouts, they are also going to experience erosion of their corpus. We live in interesting times, where none can take the chance of being not invested in equities. Have your monies in equities. However less it may be, make a start.

Make investing in equities as your topmost New Year resolution. My request, make a start by investing in a hybrid fund and understand how the SIP way to investment works. The experience will give you the necessary insight on the working of equity mutual funds and also how your money is being invested. For hardcore savers, there are apps that allow you to shift the money in the bank into a liquid fund for better realisation. Try these, and you are more likely to be convinced once you experience the advantages. Happy Investing and Happy New Year!

nk@outlookindia.com