The new year began with a lot of promise for investors. Equity as an asset class was brimming with optimism. Rates cuts were expected, which would bring in more liquidity and lower interest rates for the corporates. And inflation was expected to go south, with all the right noises and the policy directives being made by the government.

We are in April now. And how things change. The volatility in the Sensex has made investors exit equities. Mid-cap stocks have fallen more than 20-25%. Rates cuts have happened, but gradually and inflation is still a bug bear. The so-called safe-heaven asset class ? gold ? has fallen like a domino: Shaved off more than 15% in three trading sessions. So, in these times of volatility and extreme pessimism, how as an investor do you react or act, to ensure that you are able to reach your financial goals?

Typical investing methodology: As an investor, you invest in multiple asset class, say, equity, debt, real estate and commodities, either based on your risk appetite (here, it means your willingness to take risk and not your need and ability to take risk). Willingness to take risk is based on your emotional set-up, at the time of making the investing decision) and/or on your greed or fear aspect. How is that you never or only in rare occasions actually invest based on the time-honoured principles of investing horizon, estimated rate of return, liquidity needs and asset allocation?

Recommended strategy: If you look at gold, from a price level of R33,000 per 10 gm to R25,000 per 10 gm is a mighty fall. However, if you invested at higher levels, you can still buy the same 10 gm gold at the current prices. So, what you have lost is only the appreciation in price. However, you can still buy the same 10 gm, which you had originally wanted to.

Gold as an asset class is typically to be looked at as a hedge instrument and not as an investing vehicle. But, unfortunately, you like to be in the herd rather than be the lone warrior, who believes in his investing methodology. With the wired-in world, a sneeze there and you catch the flu here. You need to be clear about your investing time horizon ? short, medium or long term. And the investing horizon should determine your reaction to news. The same situation would have different answers, based on your investing type and investing horizon.

Unsold inventory in key metros is a red flag in real estate investments. Location holds the key to real estate investing, along with the ability to be nimble-footed. The returns delivered by real estate are phenomenal. But what goes up, also comes down ? remember gold? So, be prudent while investing in this sector, going forward.

Debt as an asset class is expected to deliver higher yields over a multi-year investing horizon. Softening of crude prices and lower gold prices is expected to reduce the current account deficit, which should, in turn, reduce inflation. This should hasten the rate cuts by the Reserve Bank of India.

All of the above should propel growth and upward trajectory in equity. But do remember that commodities, including gold and crude, are falling and, instead of growth, it could also lead to recession, in the near term. So, if you are investing in direct equity, stock picking is the key. If you are investing in mutual funds, it will be prudent to take a 3-5 year-plus investing strategy. And if you need your money in 12-18 months, equity is not for you, if you cannot afford to lose your principal.

One of the key things that you should do in your investing strategy is to have your ?investment policy statement? in place. It should contain your investing strategy, asset allocation, rebalancing targets processes and estimated rate of return. This simple document will serve as your guide when volatility and unexpected crashes and rise happen.

Investing is a process and you must stick to the process, and over the investing time horizon, you will reach your investing and financial goals.

Extreme pessimism and volatility is the right time to take stock of your investing strategy. Do revisit the basics and your initial reason and need go for a particular investment. Take your calls, even tough ones. Short-term pain could be necessary for meeting your long-term goals.

points to remember

n Gold as an asset class is typically to be looked at as a hedge instrument and not an investing vehicle

n You need to be clear about your investing time horizon ?short, medium or long term

n Unsold inventory in key metros is a red flag in real estate investments. The returns delivered by real estate are phenomenal. But what goes up, also comes down. So, be prudent while investing in this sector, going forward

* If you are investing in direct equity, stock picking is the key

* If you are investing in mutual funds, it will be prudent to

take a 3-5 year-plus investing strategy

* If you need your money in 12-18 months, equity is not for you, if you cannot afford to lose your principal

* You must have an ?investment policy statement? in place. It should contain your investing strategy, asset allocation, rebalancing targets processes and estimated rate of return

* The author is founder & managing partner of Zeus WealthWays LLP