How your investment portfolio can beat inflation, recession: A guide to diversification | FE Manage Your Money

n an effort to make your portfolio dodge the double-edged sword of recession and inflation, it is important to have both fixed income assets and gold on one side, and equities on the other.

How your investment portfolio can beat inflation, recession: A guide to diversification | FE Manage Your Money
At FE Manage Your Money panel discussion, Gurmeet Chadha and market veteran Sanjiv Bhasin, Director, IIFL Securities, helped guide investors to build a well-diversified portfolio.

In an effort to make your portfolio dodge the double-edged sword of recession and inflation, it is important to have both fixed income assets and gold on one side, and equities on the other, said Gurmeet Chadha, CEO of Complete Circle Consultants. At FinancialExpress.com Manage Your Money panel discussion, Gurmeet Chadha and market veteran Sanjiv Bhasin, Director, IIFL Securities, helped guide investors to build a well-diversified portfolio that could tackle the threat of inflation and recession, looming large on Dalal Street and stock markets across the globe.

FE Manage Your Money : Inflation and recession proof portfolio

How to diversify

While Gurmeet Chadha said that there is no standard formula for diversification, he added that young investors should have more exposure to equity. “We call it bucketing. Anything that is short-term to medium-term should be fixed income with less risk,” he said while advising investors to stick with equities for the long run. “In cricket, they say you need a batsman to preserve and one to attack, so both a Pujara and a Pant are needed,” Gurmeet said while stressing on the need to diversify between asset classes.

The CEO of Complete Circle, bullish on stocks, said that young investors should have a 5-10 year horizon and invest 60-70% in stocks. He said investors should keep the rest divided between fixed-income assets or interest-yielding assets and gold. Gurmeet continues to advise investors to invest in stocks for the next few years adding that it is time to rebalance portfolios after the recent market turmoil.

Sanjiv Bhasin favoured equity investments over a long term horizon. He said fixed income returns will always be below expectations. “There are four asset classes – gold & silver, real estate, fixed income, and equities. Of all these real estate (physical) is not in your budget. Gold is an emotional asset. Fixed income is not giving returns of yesteryears. So, equity becomes the only asset class where a SIP in a monthly form can create wealth over a period of time,” Sanjiv Bhasin said.

However, Bhasin added that investors above the age of 50 should have a large part of their portfolio invested in fixed income, while reminding again that returns will not beat inflation. “Gone are the days when the government used to borrow at any cost, now Indian market bond yields are stabilising,” he said. Sanjiv Bhasin added that it is time to look at our own markets that have withstood the recent test of Foreign Institutional Investor’s outflow. “Our domestic retail investor has now realised that equity as an asset class is here to stay,” Bhasin said while highlighting the strong SIP inflows that domestic markets have seen recently.

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