Should I quit the markets now?? In wars, there is nothing right. Only what is left!!!
As I sit down to write this article, the clouds have gotten darker and definitely more ominous. But for those who are in the capital markets as well as everyone who is saving and investing, the situation is definitely more than alarming. The consumers, across the world, which consists of pretty much everyone are equally compromised with rising costs and overall inflation.
Wars, even though a reality was not something that we expected to happen on a scale that will affect the world. But it has. And in an area, geographically, that is very important for everyone in the world and amongst parties that are dug in deep to see it to the end. Without going into the politics of it, suffice to say that two countries are there and who cannot be moving out of their landmass and geographies. And there is another which brings in heft and influence much beyond the immediate warring countries. But there are other countries too which are obliquely playing a part, one way or the other.
Markets Under Pressure Across Asset Classes
So how has all this affected us?? Of course stock markets are down significantly. So are every other option, except the US Dollar (against the INR).
- NIFTY 50 trading below the 22,500 levels (near the 1 year level)
- BSE SENSEX trading below the 72,700 levels (near the 1 year level)
- Gold (24 carat) trading below the Rs.14,000 level having shed 7 per cent just today
- Silver trading below the Rs. 230 per gram level. Fallen even more than gold, just today
- 10 year GSECS trading at 4.4 per cent
- Crude (West Asia) hovers around the $113 per barrel, having touched 119 this morning
Not a single asset class apart from currency showing an upward trend. Essentially, whatever should have been up isn’t and whatever should be is up. The USD /INR is just shy of touching the 94 mark.
Even though the professionals encourage us to shut out the noise of war and upheavals, it is easier said than done.
What Should Investors Do Now?
What do I suggest? Let’s rationalise this. This war is by far the biggest we have had to face this century. And there are no easy measures that I am expecting. Of course, it would be easy if the players were to check their egos, but that isn’t happening.
So, for the shorter end, the first thing to do is “instead of panicking, lower the expectations” BUT FOR THE YEAR ONLY. No war has gone on for ever and such choke point conflagrations that tend to suck in the world will have an end sooner or later.
Revisit And Simplify Your Portfolio
Second: downsides are great times to take relook at the portfolio and check out the under performers. Obviously, many will be showing negative returns over a period but that is not the way to judge. Check out if the scheme has returned worse than its peers and moreover if it has consistently underperformed the benchmark.
Make the portfolio more compact. Check to see the portfolio does not resemble a market page from a business daily and make every effort to compress it to 8/9 schemes. Anything more is a sure shot signal that the portfolio will regress to the mean. Always happens whenever the number of holdings go up. And limits the upside that will happen. Essentially use this time to correct portfolio imbalances.
Avoid Panic, Focus On Strategy
Stop looking at your portfolio every day. And ask yourself if you are in the right mix. There are plenty of options who want to take equity exposure minus the risk and for such investors the SIF route (if you have more than 10 lacs rupees) could be a great way forward and for others the MAAF (multi asset allocation funds) are the best fits.
In pure equity, the entire basket is so cheap now that everything -sector wise, style wise, capitalisation groups wise is a buy. But the current buys should be done over the next 6 months, stagger it. So that the lows and the uncertainty is best made use of.
Managing Current Investments In Volatile Times
But what about your current investments? The time for doing drastic things is gone and do as detail above. The markets could go down further and it might not. No one knows. But trust me on this…it will do a lot of unexpected twists and turns. And none will be predictable.
As we stand now, the equity values are screaming “buy”. And everyone seems to want an exit. If you have short term losses then this could be the time to book losses and buy back immediately. So that some relief from taxes can come about as and when profits happen over the allowed period.
The Bigger Lesson For Investors
Over the last couple of years, the investment money was happening in auto mode and many of us were of the opinion that is how it works. But it does not. We have only one job- to allocate. Let’s do that foremost and we will be doing the best favour to ourselves. That’s the only thing we have on which to exercise control.
And having done so, let time do the rest. And as and when the good times come back, and they will, what do you think will come back the fastest??? Did you stay invested after the Russia-Ukraine war and make money? Did you stay invested after covid and make money? The lessons of the past is the marker for your current action.
(The author is the Founder & CEO, Plexus Management Services)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd.
