ViJiT
Vijith Pujari
What to do with this Market?
What to do with this Market?
WITH high volatility fast becoming the order of the day, the retail investor is in a quandary. A long bull run has bloated the equity portfolio of many investors. But for the past 10 days they are finding themselves at the mercy of a roller-coaster market. If you are a retail investor, this could well be the time to review your asset allocation. A higher-than-desirable exposure to equities compared to the risk profile should be avoided. Re-balance your portfolio such that investments are spread across equities, debt mutual funds, fixed income and cash in the right proportion. ET looks at the road ahead.
Stay invested in MFs
NAVs of equity and balanced funds have taken a 15-20% correction from May 10 levels. Long-term investors should take volatility in their stride. The last three crashes of ’00, 1995 and 1992, have shown that post-crash, funds have usually been lackadaisical or negative for months in a row. But in the long run, MFs have done well. In the past five years, equity funds have given returns in excess of 20% CAGR. So, a longterm equity fund investor should stay invested at current levels and continue with SIP mode.
Time for some cleaning up
IT’S time for some spring cleaning of your portfolio. Investors may identify scrips where they are making gains and see whether the fundamentals justify the price. If not, some selling will strengthen the quality of the portfolio. Similarly, identify stocks that have fallen a lot, but still seem expensive by conventional metrics; these too can be weeded out. Stocks that were bought on tips are ideal candidates for weeding out. There may be a fear that stock prices may go up subsequently, but that is an acceptable risk compared to them falling further from current levels.
Identify big losers
IN THE current scenario, short-term investing has lost its charm. But long-term investors may seek opportunities in the mayhem. Identify scrips that have fallen substantially such that their fundamentals have become attractive, or scrips which had not gained much in the rally but nevertheless have been beaten down in the crash. Don’t invest all your cash at one go as there may be a situation when your investments may witness declines again. The focus should be on good companies with a strong track record, good management quality and leadership in their respective sectors.
Short-term calls are hazardous
AS EVENTS of the past few weeks would have shown, taking short-term positions can be extremely hazardous, and playing the market could backfire. While the intention may be to make good the losses already suffered, you could be poorer at the end of the day.
What to do with this Market?
WITH high volatility fast becoming the order of the day, the retail investor is in a quandary. A long bull run has bloated the equity portfolio of many investors. But for the past 10 days they are finding themselves at the mercy of a roller-coaster market. If you are a retail investor, this could well be the time to review your asset allocation. A higher-than-desirable exposure to equities compared to the risk profile should be avoided. Re-balance your portfolio such that investments are spread across equities, debt mutual funds, fixed income and cash in the right proportion. ET looks at the road ahead.
Stay invested in MFs
NAVs of equity and balanced funds have taken a 15-20% correction from May 10 levels. Long-term investors should take volatility in their stride. The last three crashes of ’00, 1995 and 1992, have shown that post-crash, funds have usually been lackadaisical or negative for months in a row. But in the long run, MFs have done well. In the past five years, equity funds have given returns in excess of 20% CAGR. So, a longterm equity fund investor should stay invested at current levels and continue with SIP mode.
Time for some cleaning up
IT’S time for some spring cleaning of your portfolio. Investors may identify scrips where they are making gains and see whether the fundamentals justify the price. If not, some selling will strengthen the quality of the portfolio. Similarly, identify stocks that have fallen a lot, but still seem expensive by conventional metrics; these too can be weeded out. Stocks that were bought on tips are ideal candidates for weeding out. There may be a fear that stock prices may go up subsequently, but that is an acceptable risk compared to them falling further from current levels.
Identify big losers
IN THE current scenario, short-term investing has lost its charm. But long-term investors may seek opportunities in the mayhem. Identify scrips that have fallen substantially such that their fundamentals have become attractive, or scrips which had not gained much in the rally but nevertheless have been beaten down in the crash. Don’t invest all your cash at one go as there may be a situation when your investments may witness declines again. The focus should be on good companies with a strong track record, good management quality and leadership in their respective sectors.
Short-term calls are hazardous
AS EVENTS of the past few weeks would have shown, taking short-term positions can be extremely hazardous, and playing the market could backfire. While the intention may be to make good the losses already suffered, you could be poorer at the end of the day.