Smart ways to invest and attain early financial freedom

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2014 was a wonderful year – this was the year when most investments (except gold) gave great returns – there is a good chance you have made decent returns if you were either on Direct Equity or MF or Real estate or even Debt funds.

So what does 2015 look like?

Looks good.

Here are my recommendations for 2015 –areas where you can make 20% plus returns:

 

Direct Equity - Stay invested in equity and increase your exposure to equity.  I believe 2015 will be the year of equity markets in India. Globally US is doing better and EU, Japan are struggling, China is slowing down and the Emerging countries like Indonesia, South Africa, Brazil have problems – EU and Japan will keep the QE alive and that will mean that low cost money will be around in 2015 and a part of that low cost money will reach Indian shores –keeping the Indian stock markets high. Having said that, you have to be sector specific and company specific in approach. Many sectors like Real estate, Power sector, mining sector have not done well in 2014 and I do not see them doing much in 2015.  The sectors to watch out for are:

  •  Pharma sector – with US economy doing well. The dollar will strengthen vis a vis the rupee and hence exporters will do well –pharma sector being export focussed, will do well
  •  Talking of exporters, one cannot forget IT services industry – this sector will also do well due to increasing outsourcing from US and from the weakening rupee.
  •  India consumption story will pick up further in the coming year – Private sector banks, few large well managed public sector banks, FMCG sector, cement sector etc will show growth in top line and bottom line. Investing in the best companies in these sectors and at the right price should be the approach. The large companies where I have my investments are HDFC Bank, Asian Paints, Crisil, Dabur, Gruh Finance, L&T, Marico, Maruti Suzuki, Page Industries, Pidilite, Repco home, Sundram Finance and TCS.
  •  There are also small and well managed companies that one needs to look at seriously -especially if you are in search of a multi bagger – some of the companies that I have invested are
  1.  KRBL ( exports India Gate Basmati rice),
  2. Kitex Garments ( an large children’s garment exporter from Kerala),
  3. Igarashi Motors ( Japanese company that supplies to Indian auto makers),
  4. Swaraj Engines (supplier to Mahindra Tractors),
  5. V Mart retail ( a company which seems to have got the mix between cost and quality right),
  6. Strides Arcolab (export focussed Indian Pharma with a super smart management)
  7. Shilpa Medicare ( based on recommendations of people I trust – but I do not understand their business at all),
  8. Mold Tex Pack ( supplies plastic packaging to FMCG market) and
  9. Amrutanjan ( a conservative company that is changing with the new generation taking over).

Many of these small company investments were given to me two of my trusted analysts and I pay for their services and hence I cannot share their equity calls with you my reader – you can subscribe to their services as well and get those recommendations –call  Jatin of Stalwart Value @ 09871675474  (http://stalwartvalue.com/about/about-us/) and Varun of Mitraaz @09739993370 (https://mitrazonline.com/)

 

Mutual funds that I recommend now: Just like equity, this is the season for you to invest in Equity oriented Mutual funds. The funds that I recommend right now are

  • HDFC Top 200 fund - this invests only in large companies and has one of the best fund managers managing this – I predict that it will give 20% plus next year – (last 12 months it has given 44.6%)
  • ICICI Pru Focussed Bluechip equity – this is the second best large cap fund that I recommend – should give at least 20% returns in this year - (last 12 months it has given 39%)
  • HDFC Mid cap opportunities fund – a very good fund that invests in smaller companies – India has many small companies that can be tomorrow’s stars. This is slightly higher risk and so higher returns as well. I expect it do well and give appx 30% RI in 2015 (last 12 months it has given 72.6%)
  • HDFC Equity fund – This is one of the largest equity focussed Mutual funds that invests in large, mid and small companies – the find manager is the best known fund manager in the industry and should give a return of 20-25% in 2015. (last 12 months it has given 51.6%)
  • Reliance Pharma fund – this is a fund that will do well as pharma industry is on a roll – the fund should give a ROI of 25% plus in 2015 -(last 12 months it has given 46%)
  • ICICI Pru Tech fund – this is a fund focussed on IT services industry in India and is expected to do well with the US economy picking up and the Rupee depreciating in 2015. I expect a 20% return on this fund in 2015. (last 12 months it has given 23.2%)
 

Residential Real estate – this sector in 2014 has struggled to keep it's growth momentum –prices are high, looks unaffordable in most places and home loans are high at 10% - plus there is a lot of unsold inventory lying around. Needless to say that the big companies from this sector that are listed are not doing well – Prestige, DLF, Shobha, Oberoi Realty, NBCC are all struggling for top line and bottom line growth. As real estate sector has low volatility, the effects of this excess capacity will stay through 2015. Investors who have invested in real estate in the past 2 years will see difficulty in selling when their properties will be ready. So stay away from this sector except if you get a great deal. There is one caveat though to this – if you get land in urban area at a reasonable price – look at that seriously. Land in Urban areas will surely do well and there are no good or bad seasons here.

 

Commercial real estate is picking up in India and there are opportunities there  -investment in office complexes need one to have larger budgets and loans are @ 14%  - so only those who have the liquidity can invest here. There is a hope of RIET being launched in 2015 where with an amount of Rs 2 lacs (or multiples of that ) you can invest in rent bearing commercial properties. As and when it becomes a reality, we will read the fine print and I will share my views on these structures. In Bangalore if you want any help with commercial properties – I can help through my friends in the market.

 

Debt – even though I do not invest in debt funds – there are a few good funds that I can recommend - these funds have the security associated with debt and also returns that are better than FD – but remember that the returns are taxed if you exit before 3 years.

  • HDFC MIP Long term plan – this fund invests 75% in debt and remaining in equity and has returned 24.3% in the past year – while this may be not replicable, I will safely bet that it will give 15% plus returns next year.
  • Birla Sunlife Dynamic bond –Retail plan (G) – this is a pure debt fund and has given 14.4% returns in the past 12 months – it should be 15% in 2015 surely.

 Gold – Gold will languish in 2015 – it is not worth investing in gold if you want ROI. Global investors are flocking towards the US stock markets and they will continue to do so in 2015 as the US economy is strengthening further. So the Global demand of Gold for investment will be subdued – it is currently at USD 1200 /Oz – and I expect it to be in the same range next year. In India, the price of gold will go up due to weakening of the Rupee – I expect a 8% weakening and hence gold price in India will go up by about 8% to 10%. This is as good as a fixed deposit return and remember India’s inflation will be around 7% in 2015. So it is not a great ROI.

So to sum up – invest in Equity directly (if you can) –otherwise invest in MF’s that invest in equities – in equities and MF’s keep an exposure to the higher risk /higher return small caps . Invest in urban land and commercial properties (if you can afford one) – Debt MF can be part of your portfolio but not too much. Avoid Gold as an investment. Aim at an overall return of 20% plus for your portfolio. It is easy to get this in 2015.

Want to also mention a few risks that are there in the horizon:

  • Modi government does not perform or Modi govt collapses due to some reason
  • Prices of Oil goes so low that many oil producing countries default and there is a resulting economic crash
  • Russia  -Ukraine conflict goes global and involves other larger nations – that will create a season of fear and uncertainty
If any of these happen – then the recommendations given above become null and void immediately – so watch out for news regularly and enjoy your growing wealth            

Author Description

S. G. Raja Sekharan

S. G. Raja Sekharan is a visiting MBA faculty, a mentor to budding entreprenuers, a wealth management consultant, an author of a book on Investing in India and the author of this blog.

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