Make your Wealth Grow (In Sri Lanka)

Well most speculated price hike in fuel took place by 11^th of February 2012 midnight, reason being stated to curb the loss making institution Ceylon Petroleum Corporation ( CPC ) and to reflect the issues taking places in Middle East countries, nevertheless Government agencies said the affected parties and certain transport providers will be given remedies (per day liters allowance at pre hike prices through the unions), it’s interesting to note IMF’s one of the concerns over Sri Lankan economy is State owned two relatively bigger institutions are loss making continuously, one is of course CPC, later is Ceylon Electricity Board (CEB), the recently allowed currency free floatation and this price hike hint the remaining $ 800 Million of IMF loan will be approved sooner rather later.

Let come to the point now, country like Sri lanka heavily relied on fuel led economy, thus fuel is fueling country’s GDP, transportation, services, retail prices so on and so forth, so fuel price is more elasticity to the inflation in the country, and this hike is being described as increase in huge margin at a single session, I reckon the impact on economy will be massive and worse. Inflation hovering in single digit in most periods of 2011 and it continues in 2012, but will be seen a steeper increase in it for sure since the commodity prices will air rocket to reflect the increase in cost of productions, general public specially middle income community and lower level thereto will suffer the most, there are no any income side increases for them to overcome the cost of living, addition to that given inflationary situation the real value of money will be depreciated in long run will put them in the situation to rely on Government’s remedy to carry on their day to day lives.

Even though future is full of unexpectedness and it cannot be forecasted I have come up with several alternative investments to safeguard your hard earned money.

Stock Market,

Most of yours first instance after seeing the heading is irritation and agony, how come stock market can be a viable investment, since it has erased off several investors wealth and their sentiments too, but believe in history, it’s still the impeccable investment source if you have the patience, I will define the time frame if you invest in the stocks which have strong fundamentals in term of book values and strong growth potential relative to the industry it operates, then you may be waiting two to three years to double your investment, logically which is the 100 % return on your initial investments, economy grows with the macro economy factors, industry grows with the economy, organization grows with the industry, bottom-line grows with the organization, book value grows with the bottom-line, so as the share price too  grow with the book values.

( Illusion ;- Mr. A purchases "Y" share (Blue chip) for Rs 20 at this bearish market, if ASPI shows decline trend then share price of "Y" too decline say down to Rs 10, but its a unrealized loss, once the market picks up and the price goes up to Rs 50 you will get out with 150% of capital gain in return, so be patience, be vigilance, pick blue chips with fundamentally strong, & do some calculations )

"buy when others are fearful" - The Warren Buffet

Sri Lankan macro economic factors are showing good signs of improving with the foreign direct investments are expected in to the country.

Forex Market

According to me this is the most secured form of investment to safe guard your real term of the money and even can make some hands on profit once the rupee further depreciated, it is advisable to collect some dollars (also can be in Pounds, Swizz franc, Singapore dollar but not Euro at the moment) at the prevailing rate and wait for 6 to 12 months to see some appreciable movements from an investor vision, given the inflationary conditions and flow of events which adding salt on wound to the economy, Sri Lankan rupee will be in the depreciating trend until CB gets the foreign inflows within the stated time frame, state make any alternatives for the fuel imports and ensures the GDP growth will be well in target of achieving 8.5% growth year on year basis. 

All these cannot be done in overnight and ongoing crisis situation in Europe and Middle East won’t do any favor for government to back in track, so people start buy some foreign currency to escape from the rupee down fall to come. 

Gold market

Given the scarcity of this commodity, prices will be ever increasing for this particular investment, black gold (oil) showing some sort of mismatch in supply it always feel good to own some Gold to back up your financial needs in future, but in the longer run social perception and desire to own Gold designed Jewells can be diminishing since trend is seeing towards Gold’s alternatives such as platinum and silver being used most in recent years, even in some case people prefer not to wear any ornaments as such, but we don’t need to worry much since our culture is more depend on owning Gold as much as you can theory, so according to me it’s a worth buy if our rupee will show the depreciation phase in coming days. 

Banking institution

Very conventional form of investment, savings is the suitable term for this, very low risk in term of possible bankruptcy, since Central Bank governs these institutions with the strict guidelines and most of the front line banks are listed in the Stock market to ensures the transparent of their activities, the savings rate also will reflect the co relation with interest rate in country so it reduces the possible exposure for rupee, but the hike in inflation won’t be taken into account when setting the interest rate for your savings, I rate this as the last resort investment source and suits most for the people who are risk averse in nature. 

Money management is an important aspect of this chaos environment and in ever changing policy makers ruling, so do some home work such as analysis, research and calculation on your own before place your money/savings into an investment source, and clearly define your future needs, risk taking nature, present consumption foregone, capacity of your disposable income quadrant etc while allocating a portion of your earnings.

Disclaimer: - As I earlier stated the future cannot be foresight with the 100 % of accuracy, so the explanation given above too may or may not be materialized, and these are writings done from my knowledge to give viewers a fair idea on investing….)