The Sensex and Nifty soared at their volatile best post unlock. However, the steam is now cooling down and with fears of an Omicron-pushed downward curve, investments are being re-thought.
Governments across the globe are fighting the Corona on the apparent level while aggressively combatting another economic disaster on the far-reaching inherent level.
Rahul Jain, President and Head, Personal Wealth, Edelweiss Wealth Management lists a quick reckoner when looking out at investment prospects.
No portfolio comes with zero risk. Follow these four rules to reduce risk of your investment portfolio.
a) Be patient: Remember March 2020, when markets nosedived significantly following the declaration of COVID-19 as a pandemic by the World Health Organisation (WHO). Many investors got unnerved and many exited, converting their notional losses into actual ones. However, markets rebounded spectacularly well and rewarded those who had the patience.
b) Use this Time as an Opportunity: Research better about potential investments. Adopt caution during stock selection and add the fundamentally strong ones. Do your analysis carefully and understand the company’s balance sheet and corporate governance model, among other things, before investing.
c) Continue with Your SIPs: If you have invested in stocks through SIPs in mutual funds, this is not the time to stop your SIPs unless you have achieved your goal. When markets are down, your SIPs will fetch you more units. It will average out the cost of buying with time. On the contrary, if you stop your SIPs, you will lose the opportunity to add more units at the same price. Remember, SIPs live their magic when markets are down, and this is a time to continue your SIPs and not stop them.
d) Diversify Optimally: For example, instead of investing all your money in five to six large-cap funds, you can divide it among large, mid, and multi-cap funds. For debt, you can invest in liquid and ultra-short-term funds along with RBI bonds. To hedge against inflation, you can invest in gold through gold ETFs or sovereign gold bonds. Also, periodically review your portfolio to weed out laggards that haven’t performed well for long periods.