What is the best investment strategy today?

By Morningstar |  19-05-20 | 

In the light of the pandemic and the lockdown, Satish Pandey, Managing Director and Chief Executive Officer at  Imperial Investment Consultancy, advises readers how to proceed.

We are amidst uncertain times. And sailing through such turbulent waters, there is a definite need for an individual to understand that short-term portfolio volatility is naturally inevitable.

The stock market and economy, in my opinion, are presently at the bottom and focussed global efforts to fight the ongoing pandemic shall eventually be positive. Until then, the stock market might swing sideways over the near term.

Investors should consider investing in staggered manner. I appeal to investors to stay vigilant and not be emotional about profit/loss. An April-like surge shouldn’t be bought into, and a March-type fall shouldn’t be sold into.

Volatility will accompany supply and demand shocks like reduced demand for automobiles, real estate, and luxury goods, and increased pressure on the healthcare and e-commerce sectors as the economy continues to recover at its pace.

If we look at the broader asset classes available, while bonds and gold have been outperforming since the crash, large-cap equities seem to be on the way back up. Mid and small caps are lagging the larger stocks. Among equities, stocks offering optimum value and low exposure to volatility could be selected from the preferred sectors, for investment like Healthcare and FMCG.

Given this backdrop, one may resort to a moderate risk portfolio with a small allocation to sovereign bonds along with a minimal exposure to international markets.

The options amongst fixed income could be:

  • Tax-free bonds from the secondary market
  • 7.75% Government of India taxable bonds 2018
  • Bank fixed deposits
  • Corporate fixed deposits (pertaining to large institutions)
  • PSU Perpetual Bonds like SBI, PNB and BOB
  • Mutual Funds: Wherein capital protection is given a premier preference i.e. specific categories such as Short-Term Debt Funds, Arbitrage Funds, along with Overnight and Arbitrage Funds.

An investor must maintain the stance of asset allocation over aggressive or conservative calls.

Over the next two years, investors may have to be flexible and active with their investments. It is imperative to liaise with your adviser and chalk out an action plan.

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Devansh Jain
May 20 2020 02:32 PM
 How about Corporate Bond Funds for 3 year investment? Or Banking & PSU Debt Funds? Which one is better?
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