The market might have hit fresh record highs in July, but individual investors’ portfolio be it stocks or mutual funds might not be showing similar optimism.
Momentum in markets is largely driven by a handful of stocks, which capped upside for most investor portfolios, as the broader market is still reeling under pressure.
A strong liquidity wave, which took small and midcaps to record highs in 2017, receded in 2018 as most investors preferred to book profits. The broader market was also hit by regulatory challenges as well as high valuations.
A well-diversified portfolio would have minimised losses for investors, experts said. There is still time for investors to rework their portfolio to achieve their crorepati dream, even though benchmark indices might be hitting record highs on a daily basis.
“Most investors are upset that their portfolio value is not rising in sync with the Nifty. This is because they wanted alpha (higher than index or market return) like in previous bull runs and had most of their capital in small and midcaps based on hearsay or tips,” Deepak Jasani, Head – Retail Research, HDFC Securities, said.
If you are in the 30-40 years age bracket, then you can still work on your portfolio to create wealth over a period of time. “A 30-40-year old investor can (if his career is well set) look at investing 5-10 percent in gold, 20-25 percent in bonds (directly and also through balanced funds), 20-25 percent in largecaps and the balance in micro/small/midcap funds to reach his crorepati dream,” Jasani said.
Ideally, this should be built over a period of time. In extremely bullish times, investors can pare down their total equity exposure to say 20-30 percent and then rebuild it again in times of correction.
We have collated suggestions from various experts on how to reshuffle or rebuild their portfolio at a time when the market is trading at record highs:
Jimeet Modi, CEO & Founder, Samco Securities
The divergence between largecaps and mid/smallcaps is very high. We advise investors to trade in laggards with a medium-term perspective, with suitable stops, instead of opting for richly valued largecaps at the current juncture. Portfolio allocation will depend on one’s risk appetite and capital available. However, an ideal portfolio for a 40-year old should comprise 10 percent gold, 20 percent bonds, 40 percent largecaps, 15 percent smallcaps and 15 percent midcaps.
Ritesh Ashar, CSO, KIFS Trade Capital
By touching record high, the market has given a kick-start to many sectors. Once it gathers momentum, the price tends to remain in motion more or less in the same direction. Investors can reduce weightage of laggards from their portfolios and increase weights in leaders. At 30-40 years, investors should look at a lower risk portfolio rather than opting for a high risk one.
Investors should allocate 60 percent towards equities, of which 65-70 percent should be in largecaps, 20 percent in midcaps and 10-15 percent in smallcaps. Another 15 percent should be into debt. Gold must form at least 20 percent of the portfolio. The remaining 5 percent should be held in cash to profit from opportunities as and when they occur.
Sumit Bilgaiyan, Founder, Equity99
Investors’ can exit stocks if they don’t like them or fundamentals have gone through the roof. In such case, investors can churn their portfolio. However, one shouldn’t sell just because prices are low and one is seeing a negative performance in their portfolio. Investors should remain focussed and invest in quality stocks.
Investors can look at investing 70 percent in equities and the balance can be invested in bonds and gold equally. In equity, one can invest 50 percent, 40 percent and 10 percent in largecaps, mid and smallcaps, respectively. One can also choose to invest via the mutual fund route.
In terms of funds, one can majorly invest in equity or balanced funds. In percentage terms, invest 30 percent in balanced, 50 percent in largecap and 20 percent in debt funds.
Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions. Moneycontrol.com