Demonetization is indeed a very good step towards eradicating black money and it will surely give good benefits in future. However, as a side effect, few investment options will be affected adversely. After demonetization of old Rs.500 and Rs.1000 notes, people are depositing money with banks. A heavy cash inflow in saving bank account will cause reduction in interest rates. SBI has already reduced fixed deposit interest rates for “Domestic Bulk Term Deposits”.
What next?
- After reduction of fixed deposit interest rate by SBI, it is expected that other bank will also reduce fixed deposit interest rates.
- In addition to that, you can expect saving bank interest rate reduction by 2%.
- From 1st Jan, 2017 we can expect a drop in Home loan interest rate and car loan interest rate by 2-3%.
- PPF and Post office saving scheme interest rate is likely to reduce drastically in coming days.
- Sukanya Samriddhi Scheme one of the highest interest rate saving scheme will also lose its shine as the interest rate is likely to fall in days to come.
- Demonetization will also impact on real estate adversely. It is estimated that property price will fall by 20-30%.
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Where to Invest Money after Demonetization?
All fixed return investment options are likely to give less return in future. What to do now? Where to invest money after Demonetization?
Real Estate
After demonetization real estate price is expected to fall by 10-30%. The main reason of fall in real estate price is a cash crunch. Majority of deal in real estate take place via black money due to unavailability of black money builders will be force to reduce property price. So, it is not advisable to invest money in real estate market.
Gold
Gold is non productive and highly volatile asset. It is not advisable to invest money in gold after demonetization. The reason is simple as no cash will be available in the market demand of gold will fall and hence price of gold will reduce.
Fixed Deposit
It’s time to say goodbye to fixed deposit. Fixed Deposit one of the most preferred investment options of Indians is about to die. The reduction in interest rates of fixed deposit will make it less attractive option. After sometime keeping money in saving bank account or taking a fixed deposit will earn a similar rate of interest.
Mutual Funds
After demonetization equity mutual fund is best investment option. You should identify and invest in good equity mutual funds. A good equity mutual funds, invest in fundamentally strong stocks. The stocks with strong fundamentals are likely to perform better over the long run.
Stock Market
The second option for investment after demonetization is a stock market. A stock market is falling down due to demonetization. Many good stocks are available at a lower valuation. Availability of stocks at a lower value of stocks is a very good buying opportunity for the investors. If you have knowledge and skills to identify a stock you should make an investment in the stock market.
Where you will invest your money after Demonetization?
Do share your answers/views in the comment section?
