SOURCE: IPO INFOInvestors may be getting the jitters as the market continues to be volatile, and the Budget is just over a month away. Low-interest rates have already made fixed-income assets unattractive. However, the end of the year is an excellent time to review your assets and make any necessary changes.
Should you invest in equities or is it better to sell now?
Even if you want to reduce your stock allocation, don’t sell all of your stocks at once. If your financial goals are long-term – five years or more – you should hold on to your investments. However, if your financial goal is a year out and you are already there, sell your equity investment and move to cash.
Sharekhan’s Head of Investment Solutions, Gautam Kalia, advises selling high-beta components of your portfolio (those that are most volatile). Small-cap and thematic funds, for example, performed exceptionally well. Here’s where you’ll want to reduce your exposures. According to Value Research, small-cap, and technology sector funds, for example, performed exceptionally well in the one year ending December 22, 2021, with returns of 66.26 percent and 62.93 percent, respectively.
Many investors have dabbled in small-cap stocks, initial public offerings (IPOs), and even thematic equity funds without having a clear investment plan or exit strategy. Foreign investors have continuously pulled out of Indian shares as the US Federal Reserve has signaled an early interest rate hike. As a result, there is more volatility. Get rid of low-quality equities and raise the equity portfolio’s general standard. After a collapse, high-quality equities have a tendency to recover. Poor-quality ones, on the other hand, do not.
“As the stock market soared and offered spectacular returns projected over two to three years in a short period,” says Amol Joshi, Founder of Plan Rupee Investment Services, “you must relook at asset allocation.”
But don’t sell in a panic. “Do not sell equities mutual funds because the markets are higher,” Kalia advises. Instead, if your investment in equities exceeds the suggested levels, reduce your allocation to shares.”
Also read – To avoid paying a penalty, complete these personal financial responsibilities before December 31.
Is it too late to invest in equities?
If you’ve been missing out on the equity market for a long, now is an excellent moment to jump on board. “If the markets get more volatile before the budget, it could be a good chance for investors who have a lower proportion to equity.” “Buy on dips and increase your allocation to targeted levels,” says Ashish Shanker, MD, and CEO of Motilal Oswal Private Wealth.
“Systematic investing plans in aggressive hybrid and balanced advantage funds can be a wonderful place to start for beginning investors,” Joshi explains.
Also, put some money into international funds. Even though the United States is a popular travel destination, experts advise caution. “When investing in US shares, don’t chase prior gains,” Kalia advises. “The majority of them are already highly appreciated.”
“Over the last decade, the United States has had one of the longest bull markets. “Valuations are being pushed to their limits,” Shanker recommends an index fund that monitors the stock market as a whole.
Should I shift from debt to equity?
No, keep money set up in debt funds for all of your upcoming ambitions over the following three years.
“In India, long-term interest rates may not rise as much as short-term rates. Put some money into 5- to 10-year-old roll-down methods. “The rest of the money should be invested in short-term assets with maturities of one to three years,” Shanker advises.
Short-term funds should work for you if you are concerned about interest rate swings. It’s not a good idea to keep all of your money in liquid funds.
Last but not least, do not liquidate your gold holdings. Use gold ETFs and sovereign gold bonds to allocate at least 5 to 10% of your assets to gold (SGB). When all else fails, gold provides stability to the portfolio.