Investing: Rishi Nathany

Are rate-sensitive sectors a good bet to start taking exposure in equities?
Given the fact that the interest rate cycle seems to have peaked and the outlook favours lower interest rates, investing in such sectors could be a possibility. However, stock selection should be based on proper fundamentals. Ideally, your portfolio should be well diversified across sectors and not be concentrated on rate-sensitives, since this may could your portfolio very volatile.

Which is better, investing in non-convertible debentures (NCD) or tax-free bonds, and why?
Tax-free bonds are suitable for investors in the highest tax bracket, since the interest income from these is totally exempt from tax. Investing in these bonds at a tax-free yield of around 8.5 per cent is quite attractive for such investors, apart from the fact that they are being issued by government owned companies.

On the other hand, the retail NCD issues presently in the market are more suitable for retail investors in lower tax brackets, since the interest income from those instruments is taxable. Therefore, one should consider investing in either of these instruments, depending on their taxable income, apart from other factors.

I am 52 and have always invested in bank deposits, Public Provident Fund, National Savings Certificate and such other instruments. Is it too late for me to invest in stocks? If now, where can I begin from?
You have some time to go before retirement and it might not be too late to start investing in equities. However, while equities normally give higher returns over most asset classes in the long run, they could be subject to volatility in the short run.

Therefore, you should plan to invest for the long run. Since you have no experience of investing in equities, you would do well to start investing in equity mutual funds through a Systematic Investment Plan (SIP) route. You could select a couple of large-cap equity funds with a good record and start investing in these.

I had exited all my equity investment in late 2009 after I made good profits and after that I haven't been able to invest. Is this a good time to enter equities?
The markets have not really gone anywhere in recent years. Moreover, there has been a huge polarisation, with certain stocks/sectors doing very well, while a large number of stocks are near multi-year lows. This could be a good opportunity for one to enter the markets and search for quality stocks available at attractive valuations.

In case you do not have the time or the skills to do your own research, you would be better off investing in equity mutual funds, taking the SIP route.

The views expressed are the expert's own. Send your queries to yourmoney@bsmail.in
Today, Certified Financial Planner Rishi Nathany answers your questions