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What the General Elections mean for your money

The big Indian election tamasha is about to begin in full swing. So what does this mean for your money? A lot actually, because election politics has a big influence on the economy, markets and the general level of sentiment among consumers. Here is a summary of issues that you should be thinking about your personal financial situation, in the context of the elections.

Financial risk due to political uncertainty
Which direction is the stock market headed to?
What do Elections mean for my Real Estate Investments?
Should politics affect my views on Insurance?
Will Inflation go up after the elections?
Will my Salary and Compensation go up after the elections?
What about my taxes, will there be any income tax relief?

Financial risk due to political uncertainty

We aren't forecasters, but going by what we see and read we also think that we are once again headed for a coalition government. It is unclear who will lead this coalition and who the different members will be. Additionally, it is unclear what compromises might be struck. All this will create some risk by raising the general level of uncertainty in the economy and for the capital markets.

Which direction is the stock market headed to?

Markets do not like uncertainty. When there is lack of clarity, markets tend to go up and down a lot, i.e., they are volatile. Every small bit of good or bad news tends to have an exaggerated impact on the stock market. The risk of being invested in the market can be high.

So what should I do?

1. Be prepared for a rise in risk and the volatility in stock prices.
2. If you can, position yourself out of the speculative stocks, and move your portfolio towards stable and bigger companies, rather than say relatively smaller companies that might not have a long enough operating history.
3. You might want to consider diversifying your investments across some more stable investments such as debt instruments or FDs, if you are very risk averse.
4. Keep some surplus cash available to invest in your wish list companies if their prices were also to fall to more realistic levels. Top

What do Elections mean for my Real Estate Investments?

Many clients we deal with tell us that they are waiting for prices to come down after the elections. Again, we are not forecasters and do not have any special insight into whether prices will fall or not. However, if the political situation is unstable and as a result the level of uncertainty gets prolonged, then this will have a negative effect on property prices in general.

So what should I do?

1. If you are in the market to sell you property and are currently getting a good price, sell - don't wait! Its not worth waiting another 3 months in the hope of a rise. You might even lose your current deal.
2. If you are in the market to buy a new property, then you might want to consider waiting. However, there is a chance that prices might not drop down at all, and you might have lost the dream property that is available today but might be gone by the time the elections are over. Top

Should politics affect my views on Insurance?

In one word - no! Insurance is something that all of us must have whether we have a coalition, a hung parliament or any other result.

So what should I do?

1. Review that you have adequate life insurance. Understand what is your human life value. Do consider Personal Accident and Disability Coverage for yourself.
2. Make sure that your health insurance coverage is active and covers you and your family for emergency situations.
3. Do insure your valuable belongings such as your home, its contents, in addition to the mandatory auto insurance that you will have if you have a vehicle. Top

Will Inflation go up after the elections?

Its hard to attach much importance to the official statistics that inflation is now at a 10 year low when the cost of basic consumption items such as food and groceries continue to going up. Whatever be the case, its likely that the inflation level will go up by the second half of the year

So what should I do?

1. Ensure that your portfolio is adequately protected against inflation through investments in instruments that will earn you a higher rate of return than inflation.
2. Understand what are the items you are spending most of your paycheck on - do some budgeting analysis and cut down on those expenses where you feel you are needlessly spending money. Top

Will my Salary and Compensation go up after the elections?

Businesses, like the markets, also like certainty. Salary levels go up when there is a confidence about the future direction and belief in a favourable economic environment. If uncertainty continues and the economic policy is radically altered, then the confidence that businesses have about the medium term future will also be affected. This could affect salary levels going forward. Top

What about my taxes, will there be any income tax relief?

Given the very high deficits that our government is running, its unlikely that the tax rates will be cut by the whoever comes to power. So don't expect any favours from the tax code. In fact, if one of the non-progressive parties come to power, who knows, there might even be a higher level of taxation on certain things like consumption and luxury taxes. Top

Comments

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sagar said : 16/04/2009	Are u also a real estate developer, who speaks that property prices will not go down