WHAT TO BUY? WHEN TO SELL? WHERE TO INVEST?

WHAT TO BUY?
WHEN TO SELL?
WHERE TO INVEST? 

Given today’s volatile markets and the
complexity and range of investment options, these
questions assume more urgency as we try to
maximize returns from our hard-earned savings.
To clarify issues and guide you through the market
maze, THE WALLET will get an experienced market
watcher to answer your queries on investment
every issue.

 In 2005, I took a home loan of Rs 15 lakh at 7.5 per cent for a period of 15 years. My father gave me Ps 10 lakh as gift from his retirement proceeds. Will the gift attract any taxes? Can I use the money to repay the loan? Or should I continue the loan and invest the amount in stocks?

Apart from gifts amounting to Rs 50,000 or less or those given at the time of marriage, all other gifts will he clubbed to the income of the assessed and will be taxed according to his Income tax bracket.
As for the home loan, as per Sec 24(b) of the Income Tax Act, 1961, a deduction up to Rs 1,50,000 can be claimed. This deduction is claimed towards the total interest that you pay on the home loan towards purchase or construction of the house property while computing the income from house property. The interest payable would be deductible in five equal annual installments commencing from the year in which the house has been acquired or constructed.
You may consider continuing with the home loan as it will ensure that you get a tax rebate. You may invest the gift amount in equity mutual funds, monthly investment plans, post office schemes or shares.

 As an investment, which is better: gold or silver? Can we consider them as investment for a short term, say one year?
Silver is a better investment than gold as it has productive use in the industry, and ample supply, unlike gold, restricts chances of a price bubble. Gold, on the other hand, is a good insurance/portfolio hedge (not a good investment necessarily) due to its limited supply and perceived store of value status.
Silver should outperform gold in 2011 as growth prospects start improving and demand for silver starts rising from the industrial sector. Gold, on the other hand, will be driven by prospects of currency debasement in major economies, which we feel might be limited in the near future.
Gold and silver should be considered only over a minimum investment horizon of three years. For a one-year horizon, the ideal asset class is debt, particularly short-term debt or fixed income bearing non-interest rate sensitive instruments such as company fixed deposits and fixed maturity plans.