8 tips to keep your portfolio on track in 2019

By Morningstar |  14-01-19 | 

Shyam Sekhar of ithought advisory cautions investors to not let the prevalent noise affect them detrimentally. Here he gives eight practical tips on how to stay on track.

1. Take stock of your investments

Your current portfolio could wholly or partially be built on the decisions made over the past two years. Which means, investments in your portfolio could be the result of choices made when they were in vogue and the market fancied them. You need to realise that today’s choices and tomorrow’s winners could be radically different. So please take the time to understand your investments and re-examine your investment thesis.

2. Get yourself a financial plan

Most investors don’t have a financial plan. They may have a goal in mind – such as retirement, however their approach is rather random. There is no clarity with regards to the amount needed and the time frame required; hence no well-defined method, investment discipline and periodic review. These are much needed and not every investor has the time and knowledge to ensure these aspects are taken good care of. A plan will help you take care of everything.

Get a financial plan first, investment advice later

3. Exit mistakes

Most investors fail to walk out of their mistakes. Instead, they sell their winners to hold on to losers. Much worse, they average down losers. There is an urgent need to exit past mistakes. Know how to identify them. Take professional to ensure this is done diligently.

4. Stay focused

This year will have its unique challenges.

Continuity of reforms is going to be a big market fear even as elections near. The economic language of the political parties and the socialist excesses which they may promise will rattle investors.

While politicians talk socialism during elections, they switch to capitalism by the time they present budgets. Investors must learn to deal with this Hyde and Jekyll brand of messaging. The reverse flow of messaging must be dealt with maturely and one’s investment thinking must be well guarded.

5. Be prepared for out-of-whack volatility

The year 2019 will throw up more questions than generate answers. The reasons are many. Our tax reforms are still evolving. GST is still some distance away from a steady state framework before it reaches a stable growth trajectory. The resolution of the bad loans crisis is still dragging well beyond the timeline given in the IBC.

Then there are possibilities of a fiercely fought election, a hung verdict, and potential stampede for power. The market does not quite understand the difference between possibility and probability. It is more likely the market will assume lower probability events as greater possibilities. So ensure that you invest in a way where the possibilities don’t affect your investments. That means, don’t allow measurement of returns to affect you.

This is hardly easy, given that we have seen positive returns in four of the past five years. We have almost forgotten what it feels like to get negative returns in equity over consecutive years. We seem unprepared for volatility beyond a particular threshold.

The challenge is to not to let volatility whack us out of our investment conviction. That is going to be the lesson most investors seem unprepared for and unwilling to accept. But by year-end, the surprise could be a happy one too.

6. Keep cash

Cash gives you the power to take advantage of market volatility. Keep adequate cash to ensure that you are well prepared to buy when the markets dip sharply. Invest gradually and scale up newer ideas progressively.

Should you hold cash in your portfolio?

7. Bet on the future

The future may be very different from the past. Market context is dynamic. Your choices and portfolio construction must now be clearly aligned to the future. Buy tomorrow’s winners. Not all of yesterday’s winners will have a great tomorrow. Tomorrow’s winners could be new and very different companies.

8. Consider professional advice

Having an adviser by your side can be the differential that can change the course of your financial journey.

Financial management is not just about periodic portfolio reviews. It is also about looking at various aspects of money holistically. Important elements like understanding your aspirations, financial history, and risk profile play a significant role in creating the right foundation. Developing the right asset allocation and aligning it to your financial goals comes next. Taking all this into account, an adviser will be able to consolidate your financial position, look at wealth management with a 360-degree view, and provide keen insights into the things that you should be focusing on.

As the quote goes, ‘life is a sum of all your choices’. Having a financial adviser by your side ensures that you make the right choices at the right times, in your journey towards long-term wealth creation.

 Do you need a financial adviser?

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