By Rohit Sarin
Navigating market volatility is a challenge that every investor faces at some point. The past few months have been particularly turbulent, with global uncertainties, trade tensions, and fluctuating economic indicators creating a complex environment for wealth preservation.
The first strategy pertaining to wealth preservation is diversification. A well-diversified portfolio can mitigate risk by spreading investments across asset classes, geographies and industries. For instance, while Indian equity markets have experienced corrections, global markets have shown mixed trends. Again, mid-cap and small-cap stocks appear overvalued compared to their historical averages, signalling the need for prudence in these segments.
Debt for a balanced portfolio
Debt instruments are another critical component of a balanced portfolio, especially during periods of equity market volatility. With Reserve Bank of India recently cutting the repo rate by 25 basis points to 6.25%, debt instruments may offer attractive opportunities for stable returns. Longer-term bonds can offer enhanced returns in a declining rate environment, while shorter-term instruments can provide stability and flexibility.
ALSO READGold Vs Silver: Which is a better investment over 5, 10 and 15 years?
Commodities can also serve as a hedge against market volatility and inflationary pressures. Investors can consider incorporating them into their portfolios through exchange-traded funds or mutual funds that track commodity indices. Alternative assets, such as real estate, can provide diversification benefits as well. While direct investments require careful consideration due to capital requirements and liquidity, investment vehicles that offer exposure to these assets can provide more accessible and diversified opportunities for wealth preservation and potential income.
Maintain liquidity
A portion of your portfolio should always be allocated to liquid assets like cash or money market funds to ensure you can capitalise on opportunities or meet unforeseen expenses without disrupting your long-term investments.
Emotional reactions like panic selling during downturns or over-exuberance during rallies can lead to suboptimal decisions that erode wealth over time. Sticking to a well-defined investment plan and regularly reviewing your portfolio’s performance against your goals can help you avoid costly mistakes.
ALSO READ5 stocks with strong insider buying
Lastly, don’t underestimate the value of professional advice in managing your investments during volatile times. A trusted wealth manager can provide objective insights tailored to your unique circumstances.
» Read More
