The Russo-Ukraine war was initially anticipated that would end in just four-five days. But now it looks like this struggle will go on for a long time. Meanwhile, the scope of Western countries' strictness and sanctions on Russia is increasing. This is having a profound effect on the global financial system. As a result, volatility in the stock markets has increased. Meanwhile, the prices of commodities like oil-gas, wheat, edible oil, and some metals are touching new records.
Due to rising inflation, central banks of countries like the European Union and Britain have started raising interest rates. The US Central Bank Federal Reserve is about to do this soon. India will also not be untouched by this. In such a situation, debt instruments and assets like gold have become more important for investors like the stability of the portfolio, and reducing the impact of inflation on it is proving to be a big challenge. In such a situation, the question arises that what should a common investor do? Let's talk about personal finance experts Anirudh Gupta (CEO, Ashiana Financial Services) and S. Naren ED (CIO, ICICI Prudential AMC) know what you should do.
Continue SIP
If investing in mutual funds under Systematic Investment Plan (SIP), then continue. The biggest advantage of this will be that you will take advantage of the falling market by buying more units. During a bullish market, more units will be credited in a falling market than the number of units credited to your portfolio from each month's SIP. It is better if it is a top-quartile fund. This means the top 25% schemes in terms of returns. You can select the top quartile scheme in the first week of every month. This will give an average of 3-4% higher returns than Nifty.
Make a new investment in debt
Make a new investment in debt (debt). Remember that while equity provides benefits through capital appreciation, debt brings stability to the portfolio. Given the high volatility in the equity market, there is a need for stability in the portfolio right now. Debt funds can be a better way to invest in this asset. There are mainly two types of such funds. Under money market funds, money is invested in companies for 90 days.
The only thing to keep in mind in this is that tax is levied on withdrawing money before one month. Low-duration funds invest money in companies for a year. Their average return is half to one percent more than FDs.
Adopt multi-asset fund
In the current environment, a smart mix of equity, as well as debt, gold, real estate, and global funds, would prove to be a better strategy. That's what multi-asset funds do. In this, the investor has the facility to switch from one asset (like shares) to another asset (like gold). This gives better risk-adjusted returns. In a multi-asset fund, equity and debt are equally invested and not less than 10% is invested in any asset.
This includes gold, which compensates for the loss due to inflation. Multi-asset funds generally invest 25-65% in domestic equities, 25-65% in debt, 0-15% in gold, and 10-30% in global equities.]
Keep investing in large-cap stocks
There is also a positive side to the Ukraine crisis. Foreign portfolio investors (FPIs) were selling in India long before the crisis started. Now he can return. The reason is that the US central bank Federal Reserve will be less aggressive in raising interest rates and the allocation of FPIs in emerging markets will shift towards India as countries like Russia are out of their portfolio. In such a situation, investing in large-cap stocks should prove to be a better strategy.
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