After the highs: Rejig your portfolio | The Financial Express

After the highs: Rejig your portfolio

Target maturity funds, where the volatility tends to reduce as the fund gets closer to the target maturity, looks promising now.

After the highs: Rejig your portfolio
Experts say investors should look at rebalancing your portfolio and stick to your long-term asset allocation strategy, go for low-duration debt funds, continue investing in quality stocks and invest via SIPs.

At a time when the markets are seeing some consolidation after the benchmark indices hit new highs, investors need to protect their portfolio from any short-term market correction. Experts say investors should look at rebalancing your portfolio and stick to your long-term asset allocation strategy, go for low-duration debt funds, continue investing in quality stocks and invest via SIPs.

Rebalance your portfolio

As the proportion of equity in the portfolio has now increased, investors should shift some money from equity to debt and gradually reduce the overall allocation to equities. This will help to reduce risk in the portfolio. Stick to long-term asset allocation plan and rebalance the portfolio periodically. Moreover, increase the portfolio of high dividend paying stocks as one can earn steady dividend income in the long-term. Rising dividend payout ratio over a long period of time can be a good income source after retirement.

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Sushil Jain, CEO, PersonalCFO.in, a wealth management firm, says, if the financial goal is two or three years away, the investor should withdraw some money from the equity investments and park in fixed income products. “If you are a conservative or moderate investor then switch to debt hybrid and start a systematic transfer plan (STP). If you are an aggressive investor, you can switch to equity hybrid and start a STP,” he says.

Investors must follow the asset allocation strategy at all times. Brijesh Damodaran, managing partner, BellWether Associates, says if there is any cash flow requirement in the next 12 -18 months, then investors should park money in an asset class, which has low volatility. “This will ensure that the capital is not lost and is in line with the asset allocation and cash flow needs of the investor,” he says.

Invest in short-duration

debt funds

To reduce risks, investors should look at ultra-short term bond funds and money market schemes as these funds have low interest rate risk and the credit risk depends on the credit quality of the underlying instruments. Investors should look for liquid funds for higher returns. “In a debt segment, as the interest rate is rising, go for low duration funds. In the current condition, if an investor has some lumpsum funds, he should park it in a liquid fund and then invest in equity on every fall,” says Jain.

Target maturity funds, where the volatility tends to reduce as the fund gets closer to the target maturity, looks promising now. Investors who are targeting specific segments of the yield curve can invest in these funds without being locked in till maturity. Short-term investors should match their investment horizon with the duration of the fund.

Invest through SIPs

In the current market scenario,  invest through SIPs and avoid investing money in a lump sum. In October, inflows through SIPs touched an all-time high at `13,041 crore with 593.3 lakh outstanding SIP accounts, according to data from Association of Mutual Funds in India. The biggest advantage of an SIP is that investors do not have to time the market and they should look at step-up SIPs to gain from the rupee cost averaging and higher compounded returns in the long run. One can start with an SIP with lower contribution and gradually increase the investment with a rise in income to match various financial goals.

In a step-up SIP, one can increase the contribution at periodic intervals. It helps one not only be a disciplined saver, but a disciplined investor keeping in line with the rise in his income and financial needs. If the financial goal is huge, the strategy to increase SIP can be utilised, based on the goal period and amount needed.

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SMART INVESTING

If you have lumpsum funds, park it in a liquid fund and invest in equity on every fall

Follow the asset allocation strategy at all times. Protect your portfolio from any downside risks

Target maturity funds look promising now. Consider low duration debt funds

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First published on: 07-12-2022 at 00:15 IST