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Portfolio advice for the Great Lockdown, for existing and new investors

Portfolio advice for the Great Lockdown, for existing and new investors

Portfolio advice for the Great Lockdown, for existing and new investors
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By Anshul  Apr 17, 2020 7:08:55 PM IST (Updated)

Given the possible rise in fiscal deficit and a recession looming over the country, investors must be wondering if they should go for a portfolio change.

Stocks have been seen sharp volatility over the past month or so, thanks to the coronavirus pandemic.

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With economic growth expected to sink to the worst in decades, what should investors who may have seen losses on their portfolio do? What about those have cash waiting on the sidelines to deploy?
Existing investors
Stocks investors, be it direct or those invested via mutual funds, should start with analysis of their portfolio.
“Direct investors should look at the quality of the companies they have invested in. Consider the fundamental strength of the company,” says Harsh Jain, COO, Groww suggests.
What if you are holding stocks that have incurred steep losses? The first step should be avoid getting caught up in the anchoring bias: which is to decide you will sell it only when it recovers the loss.
This can be overcome by using a simple thumb rule. The stock that you hold currently – would you buy it at the current levels? If the answer is no, consider selling it and buying a stock you would if you had cash.
Mutual fund investors should ensure their asset allocation is in line with what they had planned. A 50:50 split between debt and equity mutual funds will become about 60:40 if the equity portion falls 30 percent, requiring the investor to sell of some of the debt portion to restore balance.
Within equity mutual funds, experts advise maintaining core (comprising a few large, diversified schemes) and satellite portions (which could be slightly riskier smallcap/midcap/global funds).
Debt fund investors should at least know the credit ratings of each debt security that they are invested in, says Jain. This can be checked on sites such as Morningstar or Value Research from every debt fund’s portfolio section.
If your fund seems to be investing in a lot of securities that do not have solid ratings, check with a financial advisor if it seems right.
What about fresh investments?
Investors who have cashed out from the markets or have additional capital to deploy should first not prey to trying to time the market.
That means that instead of speculating whether stocks have bottomed out, they should invest if the opportunity looks attractive.
Generally, future stock returns tend to be good after a steep sell-off still make sure you are investing with a long timeframe.
“Investing in these times is a sure shot way to earn super-normal returns in the next 3-5 years. Markets are not going to remain at these levels for very long. The moment the world finds a manageable solution to this pandemic, the equity markets recover would start and it would be swift," says Raghvendra Nath, MD, Ladderup Wealth Management.
Aamar Deo Singh, Head Advisory, Angel Broking, says investors should focus on investing in high quality stocks but he advises adopting a staggered approach should help.
He names companies consumer and pharma names such as Asian Paints, Bata India, IPCA Labs or Dr Lal Path Labs as some attractive names.
"Companies which are secular or structural and do not suffer from business cyclicality have stable and consistent growth prospects along with longevity in growth," adds Akash Singhania, Fund Manager, Motilal Oswal Asset Management Company.
"This is a good time to get out of average quality stocks and move into high quality names," says Nath.
Simpler still, investors should consider starting regular investments into mutual funds through SIPs.
“SIPs allow continuity of savings, averaging of the portfolio NAV and may offer a big positive upside when the markets will pick up. This may be a once in a decade opportunity at these price levels and keeping a long term horizon will definitely help,” says Zafar Imam, Lead, OPPO Kash.
Investors can consider diversified or balanced funds after thorough research. It's also important to pay attention to the asset allocation of the fund, its current portfolio, the fund manager’s track record and risk preference.
Investors can also consider debt portfolio and shift investments into some corporate bond mutual funds, suggests Nitin Rao, CEO, InCred Wealth.
"That can hopefully give a superior return due to yield differentials seen," he adds.
Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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