Advisers say the immediate priority is defense as geopolitical tensions cloud the near-term outlook for markets.
“Events are unfolding, and it is difficult to predict how things will unfold in the next few days. Investors should work to protect their portfolios, and not make aggressive equity bets, but have a wait-and-see approach,” says Jozer Gbajiwala, president of Ventura Securities.
Geopolitical tensions have dragged the Nifty 50 down 7% from 26,341 on February 3. In three months, the index is down 4.4%, although it still shows a gain of 9.6% compared to last year.
InstitutionsMoney plan investors who need funds within 6 months may consider exiting now. New investments should be led by disciplined asset allocation
Financial planners are cautioning investors against allocating too much in the investment sector, noting that the duration of the conflict and its potential impact on oil prices are uncertain.
“Historically, it has been observed that the impact of oil and geopolitical issues takes anywhere between 1-6 months to resolve, and markets return to normal,” says Vishal Dhawan, founder, Plan Ahead State Advisors.
Dhawan says investors with near-term liquidity needs should carefully review their portfolios. “Those who need liquidity in the next six months can withdraw now, while those who have a year can wait a bit before withdrawing,” he says. While some asset managers see opportunity in the correction, they insist that new investments should be guided by disciplined asset allocation.
“The current shakeup provides a good entry point,” says Nero Carquera, Phizdom’s head of research. He suggests continuing with asset allocation and adding surprisingly large-cap-based funds over the next three months.
Some advisors say that corrections can also be an opportunity to rebalance a portfolio to return to the optimal asset allocation if equity exposures have risen after a long bear market.
Diversification, advisers say, remains the cornerstone of portfolio protection in periods of volatility.
“Debt acts as a cushion against equity market downturns, while gold acts as a portfolio stabilizer and defensive asset,” Karkra said.
For equity enthusiasts, investors can go for large-cap oriented funds instead of aggressive exposure to more volatile segments of the market.
