Investment planning: How to make your portfolio work in troubled times

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Updated: June 18, 2019 7:08 AM

In 2019, till date, the BSE Sensex has delivered an absolute return of close to 10%. But the individual portfolio is not reflecting the same.

Investment planning, portfolio work, troubled time, business cycle, future growth, growth potential, Capital protection, bull market, bear market, money news, SIPHow to ensure your portfolios works for you in these troubled times

As an investor, you may have noticed that the gains accrued in 2017 was wiped out in 2018 ( if the holdings were pre-dominantly in small and midcap mutual funds and shares). And in 2019, till date, the BSE Sensex has delivered an absolute return of close to 10%. But the individual portfolio is not reflecting the same.

And this is causing a lot of trouble for investors as they are not able to decide about their equity investment. Are the days of finding a good investment asset class—buy it and hold it long over multiple years—over now?

Monitor regularly
Well, it was never the case. As an investor, one has to always monitor the progress of the investment and act accordingly. With the advancement in technology, data distribution has become more reachable and available to the investor. On account of this, the movement in prices is fast and many a time does not allow an investor to react or act in a swift manner. And then, if the returns are growing, as was the case in 2017, returns only become the prime consideration, without looking into any other important elements—risk, business cycle, future growth potential, etc.

Capital protection
With the volatile markets, the prime consideration of investors should be to preserve the capital invested whatever be the asset class. Is this the path as an investor, you wanted in the first place? Is there a process or method, which can help alleviate this volatility in returns and create more secular returns?

Be it a bull or bear market in the equity asset class, or a stable debt market or an economic situation where defaults in fixed income instrument are on the rise, as an investor, one needs to have an action plan or one’s own investment policy statement (IPS) in place, one which guides at all time.

But then, this is more of an exception, rather than the norm. Most investors like to ride the wave up and hoard the investments, when the sentiments are down. What is noticed is buy at the top, average at the way down and then sell when the prices are deeper in red .

Sell to make profits
In fact, 2018 has shown the mirror—it is important to sell to book profits or reduce the loss. Besides knowing when to buy, it is also important to know when to sell. In fact, when to sell is the key in the investing journey. This can be implemented,when as an investor you would look at investment as a process. The investment journey basically reflects an investor’s personal traits. There have been many instances, wherein the behaviour of the investor reflects on the investment return.

If you have been fearful, you would have stopped mutual fund SIPs in October 2018 and may not have re-started the SIPs now as the equity markets have gone up by over 9%, as of date. However, if you have been a process-oriented investor, the SIPs would have continued and in some cases, there could also be additional SIPs allocated to the corpus.

Realign the portfolio
Many investors continue with the investments and visit the portfolio at very infrequent intervals, and at times are even too lazy to re-align the portfolio. One of the ignored parts of the investment process is that an investor needs to know his personality as it is ingrained and could reflect on the investment returns in the investment journey. And if you know this, whether you are an active investor or a passive investor will not matter. What does matter is that you are on top of the portfolio management, be it managed by self or by a professional.
In today’s time, and at all times, it is important to monitor the portfolio whatever are your behavioural and personality traits. Together with having your IPS, this is the key to ensure that your portfolio is always working for you, in both active and passive manners.

The writer is managing partner, BellWether Advisors LLP

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