Post pandemic investment requires individuals to undertake a holistic review of their financial portfolio.
By Sunil Rohokale
The last few years have seen India’s GDP growth slowing down from 8.3% in FY17 to 4.2% in FY20. Inflation targeting has largely happened due monetary policy intervention and creating excess liquidity. This scenario has changed the returns of the investors. We entered FY21 with a pandemic and a lockdown that has slowed down the economy.
Review and relook
Post pandemic investment requires individuals to undertake a holistic review of their financial portfolio. Investment decisions are getting complex as generating lower double-digit returns is the first big challenge and hence the suggested option is to identify a trustworthy and knowledgeable wealth advisor whose interests are aligned to yours.
The most fundamental and primary task is to review protection risk through insurance plans, both life and health. An adequate cover basis some logical assumptions of future needs are to be considered while finalising the sum assured.
Risk adjusted returns are definitely hard to come by and hence preference of the investment is critical in the fixed income investments. The general preference is AAA or sovereign bonds or one- to three-year good quality corporate bonds due to safety and liquidity considerations, but given the improved situation in the economy, good quality AA corporate bonds also seem to be finding place in investment portfolios.
Market-linked debenture (MLD) is another attractive option due to tax efficiency of the investments. With the introduction of REITs and INVITs as part of fixed income investments, there is an additional option in the fixed income plus product as an emerging opportunity. Some allocation to gold is also recommended as global risk elevates and it gives diversification to the investment portfolio, although gold has run its course in the last 12 months.
For existing mutual fund investors, they may have to study the underlying portfolio and realign the changed objective as we are moving into economic recovery. Remaining invested into a good quality large cap and mid cap mutual fund scheme could be a better option than small and the nano caps. The direct option on investment into funds gives additional delta to the returns.
Home loan rates at the lowest (well below 7%), and falling home prices have ensured better affordability to home buyers. This is the most opportune time to look for a house which is complete or nearing completion, or where the Occupancy Certificate has been received. One can expect a meaty price-value gap deal in the marketplace where development or execution risk is minimal.
Many investors invest in commercial or high-street properties connected to mix development use. Due to the pandemic and developers’ liquidity requirements, distress value opportunities exist in growth corridors where after a couple of years, these properties could be valuable income yielding properties. The other best financial option is to invest in a real estate fund managed by a manager with a great track record who is investing in residential /mix use project with preferred or protected returns.
As equity markets are resilient and most of the losses of March 2020 are regained, it is worthwhile to look at allocation and selection of those industries and companies where the impact is the least or at those which benefitted the most. It is not an easy answer; hence with the help of an expert advisor or investment manager one should realign the investment portfolio towards good quality management with consistently predictable growth companies at enough margin of safety.
(The writer is MD & CEO, ASK Group)