Navigating Current Market Volatility: Strategies for Aggressive Investors and Portfolio Diversification

By Saurav Ghosh

1.Stock market sentiments have been tepid lately. How should an aggressive investor approach the current markets?

Stock markets go through the ups and downs driven by a multitude of factors including growth expectations, consumption, inflation, job growth, geopolitical, etc. Currently, the stock market is experiencing market correction, especially in the small cap and mid cap categories. All investors including aggressive investors should spread out their allocations and not do concentrated allocations on dips or try to time the market. It is a good time to look at high yield debt investments especially with current favourable high market rates. Investors have an opportunity to get predictable returns with comparatively taking lower risk than equity asset class. In equity, good time to look at large cap stocks across sectors including technology and FMCG sectors where some of the stocks have not gained much in the last several years and have the potential to generate good alpha over an extended period.

2. Broader markets have been hovering around record highs. Should one book profits (even partially) in the mid-cap and small-cap schemes?

With Financial year closing, it is a good time to book some profits or offset some large gains for taxation benefits, especially in the mid-cap and small-cap categories. The current volatility should not be a reason to exit on fundamentally strong companies, but it is a good time to look at your allocations across asset classes & categories and make some adjustments keeping a long-term view in mind.

3. Debt may underperform during the rate cut cycle likely in 2024, while the equity market also appears to be expensive. It is time to look at safe havens like gold or other precious metals?

All investments carry risk including investments in gold or other precious metals. With geopolitical factors and possible interest rate cuts looming, the yellow metal is looked favourably as an investment option. It should be noted that gold prices have already increased significantly and while it can grow further, moving a significant allocation to gold and other precious metals is not a wise strategy as things can come crashing down if factors change. Generally, 5-10% allocation in gold or other precious metals is recommended. Investment allocation across asset classes vary by investor’s risk appetite and it is best to stick to allocations based on individual’s risk appetite. For example, a moderate risk appetite investor can look at 40-50% equity, 40-50% debt, and 10% gold/precious metals.

4. If one has to invest Rs 5 lakh right now, what should be his approach of debt, equity and gold?

As called out earlier, one should invest based on their risk appetite. Debt is very attractive currently with opportunity to lock in high rates and possibly can also help reduce your overall risk in your investment portfolio. With that said, one can consider a larger portion of the Rs. 5 lakh in debt and some portion to gold.

(The author is Saurav Ghosh Co-Founder, Jiraaf, and the views expressed in this article are his personal)