Smarter Investments to Make in 2022

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Successfully navigating the stock markets requires you to be well versed with prevailing trends and invest in accordance with them. In order to make smart investments in the coming year, consider incorporating the following suggestions. 

 1. Lower the Amount of Funds you Direct Towards Equities 

Owing to the fact that markets are beginning to appear overvalued, experts suggest drawing back on equity allocations. Although the stock market is still anticipated to reach its intermediate bottom, experts predict a bigger correlation in the following year.

With inflation currently prevailing, global central bankers have begun to hike their rates. This, interspersed with the Omicron variant spreading, poses a threat to the markets.

To add to this, foreign portfolio investors have, over the past three months, withdrawn over INR 36,000 crore from equity markets. While some of these funds have been directed towards different asset classes, a vast chunk of this money has moved to other emerging markets. Each of these factors indicates that investors ought to lower the amount of money they invest in inequities. 


2. Gravitate Towards Export-Oriented Sectors

One of the ways of smart investing for beginners is to plan investment in the export-oriented sectors that are anticipated to benefit from the U.S. Dollar strengthening against the Indian Rupee owing to a rate hike hoped to be implemented by the U.S. Fed.

The past three months have witnessed the U.S. dollar rally by 3 percent as a result of which it is now operating close to the April 2020 high of INR 76.87. Akin to the equity markets, forex markets are also expected to experience a ton of volatility in 2022 owing to varied signals being imparted by a number of central banks.

Negative pressure on the Indian Rupee was owed to the recent rate hike by the Bank of England which was brought forth against market expectations.  Given this backdrop, it would be smart for investors to consider investing in export-oriented sectors as a weaker rupee benefits them tremendously.

In addition to a weaker Rupee, exporters are also benefiting from China plus one policy that’s been taken on by several companies. The PLI scheme is also working in the favour of exporters. Within this domain, experts are particularly focused on the IT sector as it is expected to outperform all other export-oriented sectors.


3. Short-term and Floater Funds Have Potential

 As interest rates are expected to witness a hike, medium and long-term funds should be avoided. Instead, investors should focus on short-term and floater funds.

As the new year brings several price pressures interspersed with an improved growth outlook, the RBI may choose to alter interest rates and may no longer maintain its accommodative stance.

In fact, analysts are of the opinion that the normalization of liquidity and a sharp rise in interest rates can be expected fairly soon. 


4. Take Advantage of the INR 2.5 Lakh Tax-Free Limit that Voluntary Provident Funds Have

 The 2021 Budget imposed a new tax applicable to the interest earned via Provident Fund contributions amounting to more than INR 2.5 lakhs a year. As there exists only a small percentage of people that breached the INR 2.5 lakh annual threshold, not many people were affected.

However, the Voluntary Provident Fund (or VPF) offering proves to have great potential although it hasn’t been very widely used thus far. It would be a good time to explore this offering in 2022.

High contributions within this domain can prove to be beneficial as the VPF works out to be the most viable investment option within the fixed income arena.


Wrapping Up 

 The coming year brings with it great potential provided investors and traders alike are aware of the prevailing trends and are able to navigate their way through the anticipated volatility with agility.

The Angel One website serves as a great resource that investors and traders must consider keeping up with as it provides a rundown of the markets in consumable quantities without leaving the reader overwhelmed. The information provided here can allow investors to make smart investments.


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