1. Equity markets in India and Globally have been touching new highs. As a cautious approach we would advise our clients to have a maximum equity allocation of 50% in their long term portfolios. This would reduce the downside risk in case of severe market corrections.
2. Money should not be invested in equity portfolio with investment horizon lower than 5 years as Fixed Income allocations could give better risk-adjusted returns.
3. Clients building up equity portfolio as part of their Target Allocation through regular SIP route could continue the same. Regular investment reduces the risk of market timing.
4. Election results in India will have a very large bearing on the short term performance of equity market. This would however be insignificant over a long period of time. Any large volatility during the election results, should be used by investors as a good buying opportunity from a long term perspective.
5. Fixed Income debt funds in India are going through severe volatility because of multiple risks. However, the case for investing in the same remains as strong as ever. It would be important to have a well diversified fixed income portfolio to get better risk-adjusted returns.
6. Medium Debt Mutual Funds should be invested in 3 years plus horizon as they give better tax efficient returns comparable to bank FD’s (not withstanding last one year’s volatility).
7. It would be a good time to exit non-core portfolios as the current markets will give better exit pricing.
8. While investing in the stock portfolio, it is very important to focus on 10-15 large cap companies. Similarly, Investors in Equity Mutual Funds can pick up 4-5 multi cap funds and build this portfolio. It should be noted Equity portfolios (Stocks or Equity Mutual Funds) should be invested with a minimum investment term of 5 years and more. Invest gradually to benefit from market volatility and reduce the risk of market timing.
9. Investors could also have diversification in International stocks through International Equity Mutual funds.
10. Continue investing in tax efficient products life PPF, NRI FD’s (only for NRI’s), and Medium Debt Mutual Funds etc.
11. Investors with short term horizon could invest in liquid funds (up to 3 months), Ultra Short Term Funds (up to 3-6 months) and in Arbitrage funds (between 6 months to 1 year) to get better returns compared to the banking products.
12. Avoid complicated products especially tradition insurance plans, Unit linked insurance plans and structured products. This would be more costly and non transparent.
13. Over long periods of time, financial product selection and market timing would not be the critical factor in your overall portfolio return. On the contrary, a strategy focused on process, discipline, financial goals, time horizon, patience, asset allocation and diversification could be the key factors to earn better risk adjusted returns. Do not confuse luck with skill.
14. Always have an emergency and protection portfolio. This would comprise of emergency fund (to take care of mandatory expenses of 6 to 12 months), medical insurance, disability insurance and term insurance. Kindly note emergencies do not come with any prior intimation but will have a large affect on your entire personal finances.
15. Talk to your Financial Adviser (who is experienced, qualified and registered), in case of any doubt. Financial Advisers will not assure you any returns but, give you clarity on your Long Term financial journey.
1. Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
2. All other investments too have different levels of risk like credit risk, regulatory risk etc. Appreciate this before initiating any investments.
3. Past performance of any asset class is not an indicator of future performance.
4. It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
5. The above are mere suggestions and not Investment Advice as individual cases might differ.
In case, you would like professional financial guidance, than feel free to connect to me at 9845557582 or firstname.lastname@example.org.
Naveen Julian Rego-CFP
SEBI Registered Investment Adviser
10th May, 2019