If you have understood the market dynamics and are waiting for a correction to invest at lower levels, here is an opportunity. The benchmark indices of the Indian stock market – Sensex and Nifty – have lost almost 5% in the past one week.
investorsBefore making new investments, one needs to ensure that their asset allocation strategy based on the risk profile is in place.
“The current macroeconomic and market dynamics provide an opportunity to rethink strategic allocation,” said Abhilash Joseph, Business Head – Finity.
Despite the correction, markets still look overvalued, said Vishal Dhawan, board member of Association of Registered Investment Advisors (ARIA), adding that it may be prudent to look at dynamic asset allocation.balanced profit fundWhich can protect the downside when the market is correct.
Shaji Kumar Deokar, Executive Director, IIFL Wealth, suggests quant funds to overcome human biases during market corrections. “With their non-discretionary, rules-based approach, quant funds can prove to be an ideal solution to enhance stock selection and better manage portfolio risk,” Deokar said.
active or passive?
Since the correction is across the market-cap, investors can consider investing in broad-based index funds. Opinions of experts differ on this.
Vikas M Sachdeva, CEO, Emkay Investment Managers, said, “In a market like ours, which is a delight for alpha seekers, I would bet on a portfolio of high quality stocks with a focus on quality.”
On the other hand, Vishal Dhawan said, “Index funds are a good option to look at both Nifty 50 and Nifty 500 as well as global indices like S&P 500 and MSCI World Index.”
He said, “Since the markets are still at a premium, one may want to gradually add to index funds through SIP (Systematic Investment Plan), or STP strategy so that one can continue to buy as premium valuations return to normal. Seems like.”
The combination of alpha and beta strategy was suggested by Vaibhav Porwal, co-founder of Deserve, to create a stable portfolio, balancing both the ideas. Vaibhav Porwal said, “We recommend using index funds for the large-cap portion of the allocation and actively managed schemes for multi-cap/mid-cap and small-cap allocations.”
Mint Takeaway: Broad-based index funds offer a low-cost avenue to invest in the market and take advantage of broad market corrections. However, any new investment should be made keeping in mind your risk tolerance and time frame.
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