Investing in an uncertain time

Feb 19, 2018

Uncertainty is an investors worst enemy! Take the demonetisation case for instance : prior to this revolutionary move by the government, everyone had predicted anything but “achhe din” for the next 5 years. The shocking announcement was something different, not to mention totally unexpected. The impact of this move on the markets was different too but for all the wrong reasons. Everything became more and more expensive with the stocks plunging to new lows. The rupee faced the wrath of itself more than anyone struggling to keep up with its US counterpart.

This was certainly a time of increased mental stress within the investors’ minds with enhanced doubts regarding the longevity of equity assets creeping in. Investors asked: is long-term market stability still possible? Will the markets continue on this volatile streak? Will they calm after a while? Given a situation of financial instability, what should the typical investor do?

The truth of the matter is that government policies are the real catalysts behind financial swings. Market instability often happens and it’s up to the investors to make room for it in their portfolios. Certain (but not excessive) precautions should be taken to buffer against such unexpected upheavals. How to do so? Diversify your portfolio, hunt for new investment opportunities, and stay calm even during nail biting times. Here’s how!

Diversify your portfolio

Political events, economic situation and natural disasters all affect the markets in one way or another. Some investors choose to act promptly and shift their assets from one place to another, sometimes even taking a minor hit on capital investment. There are others too who choose to be more conservative and accept this volatility as the price they must pay for earning money for doing almost nothing.

Timing’s everything for an investor in a market as volatile as equity. Diversification is the ultimate key for fortifying your assets in anxious times. You should diversify across different asset classes and rebalance your instruments periodically to maintain your risk profile.

Telling investors to diversify is very basic advice, but think about it. Diversifying your investments is something you can control in the midst of uncertainty. You get to choose which instruments to purchase and how much money you are comfortable allocating into each asset class. The instruments are numerous too!

The inception of Peer to Peer lending in India came at a time when there was increased financial uncertainty in the country. The goal was quite straightforward, and only those who had the farsightedness regarding the country’s economy in the long term appreciated the option of a technology backed innovative asset like P2P lending. With automation on the agenda of every sector, P2P lending ensured that finance wasn’t going to be left behind.

Mutual funds, gold and real estate are some more worthy assets that can be looked upon by ambitious investors. Ideally, an investment of some sort in all of these assets would go a long way in saving you from future groundbreaking policies.

Ideal time for venturing into innovative assets

There’s always room for improvement for even the best of investors. If you think your profile is already well – balanced, good for you! But that shouldn’t stop you from looking for new assets. There is an advantage to routinely looking at all the available options and seeing how they fit your portfolio because over time, asset classes produce different results. So to maintain your preferred risk profile, an investment portfolio needs periodic rebalancing.

The sectors worth investing in are really innumerable. Take technology for instance. There’s really no debate regarding the importance of technology in our lives. So, it’s certainly an asset that isn’t going to diminish anytime soon, if not ever.

Innovation and technology based assets are again multiple, but Peer to Peer lending is the cream of the crop. Utilizing online platforms to match needy borrowers to lenders looking for additional returns in the general idea of this asset. Borrowers take out financing for working capital or other personal necessities, while investors who had collectively funded the financing opportunities gain interest-based earnings in return. Investing in P2P lending has several benefits: great returns higher than deposits or bonds, easier to grasp than stocks, and a streamlined and authentic online process.

New opportunities are out there. Take the time to research and find new investments you can be confident in. Look for instruments with good growth that you can feel secure in.

Stay calm and never panic

It’s understandable to consider your investments as your own child given that it represents a life of hard work and a road to the future. To keep analysing your assets movement all the while is not a bad habit but counterintuitive to popular thinking, makes you too attached to something that doesn’t have a physical form. It makes you one dimensional, passionate in the wrong way and paralysed. Additionally, don’t succumb to the temptation of making speculations. Impulsive decisions can change your portfolio drastically and at the moment, you need a balanced and stable portfolio.

On the back of a relatively uneasy 2017 in terms of investments, the need for looking elsewhere for profitable alternatives grew exponentially. The taxation on long term equity mutual funds was a blessing in disguise as this finally gave the investors a choice to make : stick with a relatively volatile asset which is now additionally taxed or look elsewhere. Whatever it is, your money at all times must keep multiplying!

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