Take it easy policy

PERSONAL FINANCE

The crisis worldwide is surely impacting you as well. Here's how

Yes, all of us would like to believe that we are insulated from the spiralling subprime crisis. And why not, the economy is likely to grow by a good 8.5 per cent, corporate earnings have been reasonably good and credit growth is at a good 20 per cent.

The latter being a clear indication that consumption has not been drastically impacted. And there will be further credit off take during the buying season comes in October.

But here's the bad news. The stock markets have been very turbulent and asset prices have been under pressure. Then of course, there has been inflationary pressures forcing the Reserve Bank of India (RBI) to hike indicative rates like cash reserve ratio (CRR) and repo rate to reign in liquidity.

As a result, Equated Monthly Instalments (EMIs) of homes have shot up by over 40 per cent leading to a rise in defaults. In the recent months, there has been slight softening of rates but there are expectations that it will harden again, if the inflation rears its ugly head again.

So what should you be doing now? For the stock market investor, most experts have a clear view. If you have stayed invested for some time, this is the time to raise some cash. That is, you could unwind some of the position that you have built up.

Arun Kejriwal, investment advisor is very clear about it, "If you have not raised cash till now, do it immediately, next week could be too late." He advises raising almost 25 to 30 per cent and putting it aside now.

And if want to invest afresh, then do not put the entire money right now. Says Hemant Rustagi, Managing Director, Wiseinvest Advisors, "I am advising my client to invest about 30 per cent now and the rest over a time period of six months."

His reasoning is that though there has been a sharp recovery, the market still looks too stressed. Kejriwal goes a step further with, "If you have been patient till now, continue to be so for some more time."

As far as making big expenditures go, the plasma television or car you have been planning to buy on a personal or car loan may suddenly seems out of reach. And it is simply because of the fact that the interest cost has got higher. Says Harsh Roongta, CEO, Apnaloan.com, "Though it is completely dependent on your needs, buying through loans should be completely considered from the end result point of view."

In other words, you need to ask yourself whether you would purchase that good, if there was cash on hand. "As far as purchasing of white goods on loans go, I am advising my clients against it," adds Govind Pathak, director, Acorn Wealth. He feels that in high interest market, it is better to liquidate equity holdings for making such purchases.

Also, if you are looking at buying property, a first home, where you are going to stay can never be timed. However, if investing in a second property, you could wait for the asset prices as well as interest rates to cool off. In other words, this is a period when no decision is the best decision for you.