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5 Ways To Stay Invested Confidently Across Market Cycles

Here are five guidelines for investing in the market

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Recently in one of our client meetings, the reaction of the client was “I am afraid of investing. Can you suggest some ideas?

My answer was “Here are 5 guidelines for investing”.

Here it goes

1. Start with Liquid funds

Liquid funds invest in large companies which borrow from debt markets as they are able to get funds at a lower rate. They are AA+ category of paper and above. So far we have not witnessed any major problems on the credit side affecting liquid funds on account of better quality of companies.

2. The tide always turns

Equity does well for 3-4 years out of a 5 year cycle in India as well as globally. Volatility or change in price movements depends upon the asset class in question. If it is S&P 500 in the US volatility is relatively lower, if it is the nifty 50 volatility is higher. The markets have bounced back from the earlier lows reflecting the resilience and liquidity allocations from overseas investors and regular flows from Domestic investors.

3. Look at equity hybrid fund funds

In mutual funds the key thing is to stay invested to achieve returns. Timing the market is a difficult proposition for many investors. The benefit of equity hybrid funds is that as an investor even if a paper loss of 5-10 percent is there one tends to stay invested. A lot of our clients who are experienced investors as well as first time investors have experienced this.

4. Review at least once a year

As one does a performance review once a year for oneself or one’s company, one needs to review the portfolio regularly at least once a year? This helps to weed out non-performers from the portfolio and also look at future opportunities without over allocating to a particular category. As a thumb rule one needs to allocate not more than 20-25% to any major asset class.

5. Avoid exotic products as a first time investor

Sometimes investors have the money, but not the learning curve needed to convert it to wealth.

Most first time investors need to look at simple things which can work for them. Once one has crossed the initial learning curve one can look at diversification across geographies, currencies as well as asset classes. The basic financial foundation when it is in place, different asset classes can be evaluated.

Patience and confidence go together in the investing journey. Enjoy the marathon.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Anirudh Gupta

The author is CEO & Principal Adviser at Ashiana Financial Services

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