Samvat 2078 was a challenging year for investors with volatile stock markets, fastest interest rate hikes, galloping inflation, Russia-Ukraine war and spiralling oil prices. As Samvat 2079 begins, investors will have to brace for a likely recession in the West, elevated inflation and more rate hikes. Given the headwinds, the key is to remain patient and focus on the investment objective as India stands in a much better position when compared to other developed and emerging countries.
Experts say individuals should invest in each asset class based on the financial goal, time horizon and expected average return from these investments over a period. They should continue investing in the stock market based on available opportunities. And in fixed income, one can start considering debt investments with medium-duration maturity.
Here are four strategies to add power to your finances this Samvat.
In equities, an investor always runs the risk of externalities creating turbulence in the short term. However, if a systematic mode of investment is chosen, periods of volatility can turn out to be good buying opportunities. Manish Jeloka, co-head, Products & Solutions, Sanctum Wealth, says as the current global macro environment is less conducive for growth and equities, a systematic approach to investing would be most appropriate. “As for the strategy, with expectations of a narrowing market, it is best to go for bottom-up plays and some strategic long-term fundamental bets to ensure lower volatility in the portfolio,” he says.
Choose the right theme
A portfolio construction is made out of multiple assets and securities that can give you the best outcome over a period of time. Santosh Joseph, CEO and founder, Refolio Investments, says an investor must take stock and look at his overall portfolio, especially the past year or so, and see what drove him towards a particular investment decision. “Give yourself an opportunity to objectively look at the portfolio to avoid repeating the same mistakes,” he says.
In the current economic scenario, Jeloka says it is imperative to not only choose the right theme but also choose the right stocks at reasonable valuations which will help build a portfolio which will help generate Alpha in a volatile economic environment.
De-clutter your portfolio
Diwali does provide an opportunity to review one’s portfolio, Investors must take cues from the past year’s developments and gauge the long-term implications of domestic and global events on one’s holdings. In fact, the start of the Hindu new year presents a good opportunity to take stock of what went wrong in the past and correct it. Varun Fatehpuria, founder & CEO, Daulat, a new-age, wealth-tech firm, says one must get rid of multiple funds in the same category. Or an investment that has constantly underperformed its benchmark and peers. “A simple portfolio is both easier to track and manage. Do not add unnecessary complexity,” he says.
A regular review is always helpful to construct the right portfolio. Harshad Chetanwala, co-founder, MyWealthGrowth.com, says reviews may not necessarily result in rebalancing, but one can consider looking at alternatives if some fund is underperforming its peers for a long time. “Diwali could be one such occasion where you would like to look into your portfolio and review it. The important thing is to do it regularly at least twice a year,” he says.
Investors must follow a disciplined investing framework using a goal-based approach. Plan your investments around major short-term/long-term life goals like child’s education, buying a home, which will help to create different strategies suited to the importance of each goal. Always have a clean, robust and tight portfolio. Identify your needs, convert those needs into goals which have a timeline and an expectation. Joseph says if an investor has missed out on the concept of having needs and establishing goals, the portfolio will be all over the place. “Go by the process of needs getting converted to goals and goals getting converted into actionable and workable portfolios,” he says.
Risk is at the very heart of a good portfolio construction process. An individual’s risk tolerance depends on a lot of factors like age, stability of income, importance of a goal, etc. “Each investor is unique and thus has different needs. Therefore, instead of blindly replicating other’s portfolios, think about your own life situation and construct your portfolio according to that,” says Fatehpuria.
A systematic approach to investing is most appropriate in the current environment
Follow a disciplined investing framework using a goal-based approach
Objectively look at your portfolio to avoid repeating your mistakes
Choose the right stocks at reasonable valuations