These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.
How to rebalance portfolios in the current environment—between equity, debt, gold, and global assets—to manage both risk and return?
Prableen Bajpai Founder, FinFix Research and Analytics: A simple approach to rebalancing starts with defining the right asset allocation based on time specific goals. In the current environment— marked by evolving geopolitics and market volatility, investors must be clear about the time horizon for each goal. For goals one to three years away, the strategy should be conservative, with 80–90% allocated to fixed income.
If equity exposure is high for a near-term goal, it should be reduced to manage risk and lock in gains. For goals three to five years away, a more balanced approach is suitable. Portfolios heavily skewed toward fixed income may consider adding 30–60% equity, depending on risk appetite and horizon.
Long-term portfolios should have a higher equity allocation to drive growth and combat inflation. Gold and international investments should also be included. However, gold should be viewed as a diversification tool, not a return driver. A disciplined, diversified approach remains key to managing risk and returns.
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Should I pause my Systematic Investment Plan (SIP) in view of the current geopolitical tensions and ongoing market volatility?
Rushabh Desai Founder, Rupee With Rushabh Investment Services: Geopolitical tension brings immense down side volatility in the equity markets. This gives you an opportunity to invest at discounted levels, allowing you to accumulate a greater number of mutual fund units. This will help you to generate higher returns than the average when markets enter a bull run.
History tells us geopolitical tensions and downside volatility in the equity markets have always been temporary and eventually things stabilise over the long run. Always remember “be greedy when the world is fearful” (based on your risk appetite and time horizon). Rather than thinking of pausing your SIP you should think about increasing your SIP amount to take advantage in the equity markets.
Over the past 17-18 months, Indian equity markets have been quite volatile and have underperformed global peers. Valuations have become very reasonable, offering a very good margin of safety and future upside opportunity, and thus this is a good time to be greedy if you have a further 3-to-5 year time horizon.
Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. Email ID: etwealth@timesgroup.com
