Let's come straight to the point. Where does one park one's money in current times? In stocks? In bonds? Small Savings Schemes?

Given the environment, the answer may not be as simple as go for this or go for that.

But first, what is this 'environment' we are referring to? Basically, the developments that are taking place in the economy which could have a significant impact on the value of any investment over the next few months. To highlight a few:

• The slow pick up in the monsoon has already taken its toll in terms of lost output. In fact the Centre for Monitoring the Indian Economy (CMIE) has recently downgraded its estimate of full year GDP growth to just 6% owing largely due to shortfall in growth in agriculture production.

• Crude oil prices continue to surge, impacting the price of goods domestically (read inflation). Higher inflation could impact profitability of companies depending on their bargaining power with consumers and suppliers. Similarly, consumption could be impacted if incomes do not adjust to higher prices.

• Interest rates are already on an uptrend (the rate at which the government borrows is already up by over 1.5% in the last few months). Higher rates will impact both investment (companies borrow to invest) and consumption (loans to purchase cars and homes for example could become dearer) activity in the economy.

• Interest rates in the global markets too have been on an uptrend. This has led to a pull out of foreign monies from emerging markets like India as debt securities in developed markets are now relatively more attractive.

These are just some of the reasons which are causing uncertainty in the minds of investors. Fundamentally, the economy is sound.

But in the near term it is likely that we could take a hit, both due to changing fundamentals as well as factors such as foreign monies being pulled out of the country.

So what should you do now?

Equity Mutual Funds: Invest Systematically. Rather than trying to time the market it is best that you invest a fixed amount of money at fixed regular intervals. Over a year, even as the market goes up and down, you would have made an investment at a good average cost. [Best Performing Equity Funds]

Debt Mutual Funds: Avoid the regular income and gilt funds for the time being as returns are likely to be subdued for some more time. And especially given that there is considerable uncertainty regarding crude prices and therefore inflation, it is best that you stay away from such schemes (higher inflation means lower real returns on existing fixed interest bearing instruments). Go in for floating rate funds instead, which are much more safer and also offer tax efficiency and liquidity. Even the short term plans of income funds (which are much more predictable in terms of returns) are a good option.
[Best Performing Debt Funds]

Fixed Deposits: Short term fixed deposits is a good option for investors who are waiting for an opportunity to invest a lump sum amount. Be careful about entering into long term deposits as it is likely that rates may rise going forward. [More info on FD rates]

Small Savings Schemes: Most savings schemes (PPF, KVP, NSC etc) are of a long duration and therefore it is best to wait a while before putting in money. One scheme which can be considered is the post office fixed deposit. Here too go in for a shorter duration. [More on Govt. Schemes]

• Click here to get a free guide to financial planning