Plan asset allocation and build an effective investment portfolio to reap benefits

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Amid the pandemic induced crisis and with corporate earnings deemed lower, equity and mutual fund investors are anxious about their prevailing portfolio. Likewise, those who have their SIPs in equity funds may be contemplating to pause their SIPs or stop them completely. The equity market has been quiet for some time and the performance of the mutual fund portfolio is also not pleasing either. As recommended by Amit Jain, co-founder of Ashika Wealth Advisors that SIPs should not be terminated by the investor, rather the amount should be inflated, as investors who invest in volatile times will make more risk-adjusted returns in the future.

For solid portfolio returns, it is imperative that one maintains the apt asset allocation and not depend on the performance of one asset class alone. “Investors should now concentrate on pushing the money with a different strategy of ‘Invest Rightly, Switch Timely’, crosswise asset class & product categories,” says Jain. As the investments in different asset classes generate fair returns or beyond your target, it’s more beneficial to engage gains and deploy in the underperforming assets. “We suggest, a periodic re-balancing should be done across asset class & different product categories,” says Jain.

Equity vs gold

The recent review of equity and gold as an asset class has clearly shown the importance of asset allocation. So far gold has induced returns of over 20% and is assumed to grow further. “We are bullish on gold from a long-term perspective, as we feel, COVID-19 started as a health crisis, became a financial crisis and will end up as a geopolitical crisis. In such ambiguous times, gold invariably exceeds other asset classes. Therefore, we are advising 20% allocation in gold ETF by maintaining at least a 5-year Investment horizon in mind,” says Amit Jain.

Short term investments

Given the current situation of uncertainties, not all investors may be comfortable with the stock markets and economy. Some might want to wait for better market scenarios and want to retain funds in MF for short term investment to enjoy benefits of liquidity and post-tax returns. “Arbitrage funds do better in volatile markets. Global stock markets will remain volatile because of COVID pandemic, high Global debt, negative GDP growth & increasing geopolitical stresses” says Jain.

Opting the right MF scheme

The COVID-19 pandemic and its impact on the economy is assumed to modify the consumption patterns to a considerable degree. Accordingly, choose the sector for investing in MF schemes. In a medium to long term prospect, investors should concentrate on some selected equity MF schemes which have higher exposure to affordable automobiles, two-wheelers, those IT Companies focusing on artificial intelligence and automation, telecom, and pharmaceuticals.

Way forward

Instead of shifting from one asset or investment to another, it is advisable to build a long-term portfolio depending on the risk and returns. After this, analyze the performance. Apart from all this, link your investments to your long-term goals.

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