Many people have asked me “Should I keep all my money IN CASH – is it the best asset class at this time?

So, I have been struggling to answer this question..and have instead said this –

Cash is surely one alternative – but please remember there is a huge amount of risk in terms of cash being stolen, fire, etc.

Bank deposits – another attractive place for many people to park their funds today is a “bank FD” – because they want to “preserve capital”.  Banks pay anything between 3% p.a. to about 11% p.a. if you see the pre-tax return. Both cash and bank deposits do not protect you against inflation and taxes. Post inflation and post tax you are losing you your capital – which is because of a negative return.

Income funds: If you think interest rates have peaked (Monika Halan came on Ndtv profit and said that interest rates have peaked, but I do not understand all that). So if you believe interest rates have peaked keep your money in Income funds.

Real estate: Ndtv profit says real estate markets will fall by 30% in the following months, so stay away from real estate. I do not understand how real estate markets move, so I cannot hazard a guess. If you think that real estate will give you a return in excess of the interest rates at which you are borrowing (fr the next 20 years) buy real estate.

Equity funds: Well the experts at all the channels seem to think that the markets are a bad place NOW to keep your money. Again I do not understand equity markets as well as the experts who come on TV. However I have kept my SIPs on – and now they have been on for 7-9 years….and I have not stopped them. Of course I find solace in that the experts who come on TV are only looking at a teleprompter and not at a crystal ball. Or in John Templeton’s statement “I do not know anybody who knows anybody who has perfected the art of Market Timing”.

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  1. Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.” … “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.” …”What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over. So says Warren Buffet.

  2. Sir
    Reading your older articles is throwing more light and clarity to my understanding of your views

    Certainly great series of articles,
    A simple thank you is not sufficient

    Looking forward to meet you sometime

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