Anticipations for 2024 indicate a persistent environment of uncertainty and market fluctuations, driven by factors such as geopolitical tensions, potential ongoing Federal Reserve rate increases, and apprehensions regarding global economic expansion. Formulating a comprehensive strategy for the entire year may pose challenges, leading personal advisors to propose a market perspective characterised by a prudent approach in the first half and the potential for recovery and growth in the latter half—a metaphorical “tale of two halves”.
Various investment strategies may be considered for the current year, but the suitability of each depends significantly on individual financial goals, risk tolerance, and approach to investing. As an illustration, instead of solely concentrating on growth and momentum, some individuals may opt for value investing. A prudent initial approach could involve favouring stocks with robust fundamentals that are trading at a discounted value, especially in a potentially bearish market. It is advisable to identify companies with strong financial standings and competitive advantages.
Rebalancing your investment portfolio using diversification is another effective tool. By spreading your investments across various asset classes (such as stocks, bonds, and real estate) and diversifying within each asset class (exploring different sectors and industries), you can reduce risk and create a more stable return pattern. Additionally, you might consider delving into alternative investments such as commodities, gold, or assets designed to guard against inflation if you seek a degree of protection amid economic turbulence.
Having determined the nature and extent of your investments, you might contemplate actively managing them instead of depending on friends and relatives to oversee your finances. In the face of potential heightened volatility, active management could prove beneficial in navigating the market and discerning opportunities.
Learn personal finance to handle your finances well
A tête with personal finance experts highlighted the reasons why not everyone can adopt a uniform investment strategy. The mantra of “To each his own” encapsulates the essence of investment strategies, particularly in a period where stability, whether geopolitical, economic, or financial, is a rarity due to unprecedented macroeconomic factors.
Basavaraj Tonagatti, a SEBI-registered investment advisor and founder, Basu Nivesh shared, “The first step you must take is to ensure that your fundamental elements of personal finance, such as term life insurance, health insurance, accidental insurance, and an emergency fund, are in place. If they are lacking, prioritise addressing these needs as quickly as possible. Once you have secured yourself well enough, proceed to the next step, which is to review your asset allocation strategy. Despite the market being at an all-time high and the impressive performance of the equity market last year leading us to believe it will continue, it is crucial to meticulously review your asset allocation. If there is a significant deviation, realign it with your defined asset allocation to mitigate risk during such periods. This is possible once you Seize the opportunity to streamline your equity portfolio when the market is at an all-time high. Take full advantage of favourable circumstances.”
Most people succumb to the chaos in the market resulting in continued and extreme losses. Tonagatti added, “Steer clear of reacting to news and market noise in your investment decisions. Instead, adhere to a consistent and enduring investment strategy. Focus on controlling factors within your control rather than indulging in excessive predictions. It is wiser to be prepared for the worst rather than relying on predictions.”
Invest, don’t speculate
Avoiding speculation is a crucial consideration for investors aiming to safeguard their portfolios. Speculation poses a significant risk, frequently resulting in substantial financial losses. True investment involves a meticulous examination of companies, their financial health, and their long-term growth potential. It revolves around acquiring assets with the expectation that they will appreciate over time, whether through dividends, interest, or capital appreciation.
Speculation, on the other hand, is often influenced by hype, short-term trends, and emotions such as fear or greed. It entails attempting to realise quick profits by buying or selling assets based on predictions about their future price movements, often with little regard for their intrinsic value. In the current year, investors should differentiate between speculation and investment, making informed decisions about when, where, and how to allocate their funds for more sustainable returns in the long term.
Gaurav Goel, Founder – Director, Fynocrat Technologies explained, “As always, one should not overlook the key aspects of investing, namely ‘Diversification’ and ‘Risk Management’. If an investor has a long-term horizon and believes in India’s growth story, they can have exposure to equities and invest in companies with the potential to become huge in the next 5-10 years. One last piece of advice for those seeking quick returns: Do not risk your hard-earned money by engaging in speculative investments.”
Rishabh Parakh, Chief Play Officer, NRP Capitals furthered, “Be a part of the incredible India Story rather than just a spectator; be in the playing 11 rather than the 12th man, which means invest in yourself to optimise your in-hand income through business or job – be agile and active to check how you can multiply your income given the tremendous opportunities our country is offering now; then that saving should be deployed smartly and primarily in the equity market. SIP or MF, but subject to your asset allocation.”
Pay attention to market themes
Prioritising themes that propel growth within a nation is essential for successful investment. India’s ambitious plans for infrastructure development, such as initiatives like Sagarmala and Bharatmala, are anticipated to stimulate demand for capital goods and construction-related materials. The swift urbanization and establishment of smart cities will additionally contribute to an increased need for infrastructure and construction. The government’s “Make in India” initiative, aimed at enhancing domestic manufacturing, is poised to generate a ripple effect throughout the capital goods sector.
Viral Bhatt, Founder, Money Mantra elucidated, “Investors must focus on what drives the growth in this country. Themes like infrastructure, capital goods, real estate, public sector units (PSUs), and financial services are predicted to perform well. Consider companies benefiting from these sectors. Apart, one must not just rush to pick stocks to earn from the market. While a broad-based rally might occur initially, stock-picking will become key later in the year. Look for undervalued companies with strong fundamentals in growth sectors.”
A considerable number of investors tend to overlook the inherent risks associated with investing. Bhatt adds, “Be mindful of potential risks like rising interest rates, geopolitical tensions, and global economic slowdown. Diversify your portfolio and prioritise risk-adjusted returns. Look for undervalued stocks with strong potential for growth based on fundamentals. This approach focuses on buying stocks for less than their intrinsic value. A balanced approach is essential, so combine elements of different strategies like value and growth according to your risk tolerance and investment goals.”
Adjusting your portfolio by market movements facilitates the potential to achieve substantial returns over a brief timeframe. Underlining this fact, Bhatt explains, “Be prepared to adapt your portfolio mix based on changing market conditions. Shift towards sectors showing strong momentum while exiting underperforming ones. Having said this, remember that small-cap investments offer high potential returns but also come with higher risk. Analyse thoroughly before investing in this segment.”
Achieving success requires meticulous research and the prudent selection of stocks within each thematic focus. Avoid impulsive investment decisions; instead, consult with financial advisors to devise personalised investment strategies that align with your risk tolerance and financial goals.
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