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Oct 16, 2012, 02.49 PM IST | Source: CNBC-TV18

Maintain investment discipline to ensure superior returns

A lot of companies are now taking initiatives for their employees and Sobha Developers is one among them. CNBC-TV18’s series Informed Investor, which aims to help retail investors make better financial decisions, met employees of Sobha Developers to find out their investing patterns.

A lot of companies are now taking initiatives for their employees and Sobha Developers is one among them. CNBC-TV18’s series Informed Investor, which aims to help retail investors make better financial decisions, met employees of Sobha Developers to find out their investing patterns.

At the time of its IPO, Sobha Developers reserved a quota of 10 per cent of the total equity for its employees. Incentives and benefits upto Rs 50,000 were given per employee to participate in the company’s IPO where Rs 56 crore worth of shares were reserved for them.

Explaining its investment initiatives, JC Sharma, Vice Chairman & MD, Sobha Developers explained, "As and when the Budget comes in February, we ensure that all our employees are communicated with the kind of savings and what kind of instruments they should take to ensure that they can invest wisely on those schemes and save tax."

Also, given that the company is primarily into real estate, employees are given the maximum possible discount to buy a Sobha home.

An audience poll conducted by CNBC-TV18 suggested that almost 50 per cent of the employees are somewhat comfortable with stock markets or mutual funds . But an equal number said they are not at all comfortable while a minuscule 8 per cent said they are very comfortable.

Most people said they have most of the money still finding its way to traditional bank fixed deposit.  A mere 4 per cent invests in gold ETFs, which is in contrast with a whole lot of people interviewed so far, who are now beginning to favour gold ETFs.

Also, 16 per cent of people favour insurance investments. Currently, about 44 percent of people invest under one lakh, which ideally qualifies only a stack saving. The active wealth creation between Rs 1-3 lakh surplus annually is done by about 40 per cent and the real aggressive investors are about 8 percent.

CNBC-TV18’s expert panel consisting Ambareesh Baliga, Independent Analyst and Uday Dhoot, Deputy CEO, International, Money Matters, talk to Sobha employees to solve their investment queries.

Below is the edited transcript of the interview with CNBC-TV18.

Q: If you look at India as a whole, things seem to be on the mend. There is some amount of liquidity that is also coming in maybe because of global sources. Do you see the return of retail investors, therefore, into the equity market?

Baliga: I do see the return of retail investors but I don't expect them to come back in droves tomorrow just because things have changed. After this four year of bearish stage we have been in, it will take a while for these retail investors to come back.

Unless they see that the market holding up at higher levels, I don't expect them to come back so soon. But hopefully, if things look better, I suppose in the next 4-6 months, you should see retail investors back.

Q: If retail investors are not participating in the equity market, there are still investments that are being done. A lot of it would be finding its way into mutual funds or other products, can you take us through the other gamut of products that are available besides the very obvious choices that people are making?

Dhoot: If you look at any investor in India, typically it starts with tax saving. So when it is tax saving, the traditional ways are first you go in for insurance, you go for PPF etc but most of the people are basically stuck in insurance. There is a lot of money which goes in insurance. The recent RBI report said in the last few years, investor interest is more towards physical assets by way of real estate, by way of gold and not necessarily towards financial assets.

Retail investors typically go in when the party is getting over and then get stuck and move along. But I think what people need to do is to know one’s needs and then begin financial planning in terms of identifying what is the right product.

Q: Most investors following the traditional method of investment and choose to buy gold physically than invest in ETFs. Do you advise that ETF is the best form or to buy it in the physical form?

Dhoot: In India, gold has a lot of traditional value apart from the investment value that we have been talking about. Indians have been investing in gold for ages. But from purely an investment perspective, gold, for us, is nothing but like insurance in your portfolio. When will gold do well? Gold will do well when everything else around you is not doing so well.

Gold, otherwise, gives you no regular returns. There is no interest or dividend coming from gold. So, gold is purely a hedge against uncertainty. Now look at traditional investments, we have all been buying physical gold now. If you look at today's investments, you can buy gold through something called ETF, which is nothing but an Exchange Traded Fund (ETF), typically a unit of that gold ETF approximates to around 1 gram of gold.

You can buy even if you do not have a demat and trading account. You can buy gold through mutual funds as well by way of gold savings fund. Typically, these gold savings fund, in turn, invest in gold ETFs. In this way, you get exposure to gold from that. The good part about this gold is that all of this gold is backed by actual gold in banks. So, it is a fairly safe way of investing in gold.

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