As an investor, it is mundane to encounter the lows of the market. However, the trick lies in combating the situation tactfully while bringing stability and safeguarding the portfolio.
Here are a few tips to achieve the same.
1. Continue Your SIPs
Discontinuing SIPs or pulling out money from mutual funds at times of crisis is a cardinal sin. During downturns, SIPs actually, work as an advantage, helping investors to accumulate more when prices are low. Eventually, when the market recovers, the accumulated units are converted into a huge corpus.
2. Stay Away From Investing In Property
Real estate is a gamble that lures buyers with attractive offers, but all is not well as the housing market in top cities of India has performed below average in the past year. The situation will worsen if the economic slowdown continues.
The huge inventories that are sitting idle will take a longer time to clear, forcing builders and housing finance companies to mislead buyers with heavy discounts and low loan rates.
If you are buying for immediate use, then go ahead, but it is a strict no-no for a second property.
3. Diversify Your Portfolio With Gold
Uncertainty is not the end of the road and investors should never panic.
Risk can be minimised by diversifying the portfolio. And, if there is one investment that tops the list, it has to be gold. However, physical gold like ornaments or bullion should be avoided because the making charges can limit the returns, including issues such as liquidity, safety, and purity.
Investing in gold sovereign bonds provides investors with a high degree of safety and convenience as it can be purchased in denominations as low as 1 gram. As a part of your overall asset allocation, an investment in gold is worthy.
4. Create A Contingency Fund
An indispensable emergency fund comes in handy during turbulent phases like medical or financial emergencies.
The corpus size must be decided based on your expenses, earnings, and family structure. Economists say that the amount of the contingency fund should be a minimum of 6-months of your living expense. As a rule of thumb, park the corpus in liquid instruments for any unforeseen expenses.
Given that FD and debt/liquid funds do not offer high returns in the current situation, investors can consider investing in arbitrage funds that are low on risk and perform better in volatile markets. An added advantage is that arbitrage funds are considered as an equity investment and have lower taxation than debt funds which are taxed at income tax brackets.
5. Alternative Investments
The increasing uncertainties in the Indian economy have resulted in investors looking for alternative investments to diversify their portfolio.
Most AIFs require huge investments, and that can be discouraging to many. There are other opportunities like invoice discounting or bill discounting that isn’t market dependent.
Alternative investments have started to gain more importance and takers in recent times.
Markets are known to be harsh in today’s economic setup, but being an investor diversifying your portfolio is an excellent way to beat inflation. No matter how severe the situations are, it is mandatory to have a plan B. Remember that recovery follows once the bad phase ends so tie a knot and hang on.