Published on 22/09/2019 10:17:56 AM | Source: HT Media

Long-term investors should stay focused on asset allocation

Posted in Expert Views| #Expert Views #Investment

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The Nifty and the Sensex saw the biggest single day gain in 10 years in absolute terms as stock markets celebrated the corporate tax cuts announced by the finance minister with over 5% rise in across large cap, mid cap and small cap segments of the markets. Apart from the straight boost to earnings of companies from the savings on tax, the move is also expected to kickstart the investment cycle that will have sustained benefits for the economy. While equity markets scored, the benchmark 10-year Gsec saw bond prices fall as yields rose 23 bps during intra-day trade and settled 15 bps up at close as bond markets factored in the likely revenue loss of ₹1.45 lakh crore a year for the government. Experts however agree that the fiscal measures announced today will not change the expected reduction in policy repo rates expected from the Reserve Bank of India in October, 2019. “The decision will depend upon the expected impact on inflation. The expected reduction in rates will materialize, if not in this MPC meeting then in the next", said Joydeep Sen of Wise Investor. For long-term investors does this surge and expected benefits change the way they manage their portfolio?

An investment plan that is linked to the goals and needs and the risk profile of the investor should not see any change in allocation just on account of the expected revival in equity returns. The equity allocation should continue to reflect the investment horizon and ability to take risks and not the stock market movements. Similarly, moving out of debt investments in a kneejerk reaction to the expected strain on fiscal deficit resulting in increase in yields and a fall in bond prices will again lead to a mismatch between the portfolio and the investor’s ability to meet immediate needs. Systematic Investment Plan investors who kept faith and stayed invested will see their investments benefit when equity markets continue their upward move. “I discourage my client’s from tracking the markets daily, let alone make allocation decisions based on market movements", said Melvin Joseph, Certified Financial Planner. Volatility is a way with equity markets and investors should be willing to stay invested for at least 7 years to reap the benefits of equity investing", he added.

If you have been sitting on the sideline waiting for the cue to invest then you are probably not feeling very happy at the moment. Don’t focus on the missed 5% return if you had invested yesterday and instead focus on the long- term. Invest according to the asset allocation that suits you the best and stick with a regular investment schedule. Timing entry and exit into markets cannot be a sustainable investment strategy.