These are tough times to ask anyone about their investment strategy. It is possible that everyone has a different answer and an opinion. Given that we at AY are fiscal hawks, we have been trying to forewarn about the shallowness as well as the fragility of the current world markets. It does not matter if we are in developed or emerging markets, especially when governments and business do not run their fiefdoms prudently. Investors are the final suckers who take in and live with it. As representatives and advisors to investors AY cannot be more critical about the current state of affairs.
The bright side of all this is that, no matter how hard governments and businesses try to support and prop inefficient and irresponsible entities, they always fall. Every company is too big to fail, until it actually fails. History is full of such examples.
Given our thought process, it should not come as a surprise that we recommend all investors to refrain from taking any new positions in equity. Money markets and short term debt might should the instruments high on your list of possible places to park your money.What happens to investors who have been making systematic investments? We recommend that you continue to make your investments and don’t panic when the market drops. Since you are systematically investing, you should be able to average your price and do well.The impact of the bond market run on the PIIGS has increased the sovereign risk premiums. This would result in lesser number of Indian companies raising money outside of India through the FCCB route. With credit disappearing and capital markets not ready to support any new capital raising, alternative investments such as Private Equity could be one of the sources of growth capital. If an investor has a horizon of 7 years, this asset class can be a good wealth multiplier.
Taxation is often ignored by the typical Indian investor. Since the financial year end is on the anvil, it would be a good time to cover the losses and carry them forward. We have seen a lot of our customers benefit from carry forward of losses.The financial year end also makes it imperative for investors to relook at their portfolios and rebalance them if necessary.AY would like all the Indian investors to be alert against any agent trying to sell and pass on ULIPS and insurance as an investment vehicles. The regulatory push for lesser costs on investment instruments sold to investors, has pushed the agents to mis-sell other instruments under the garb of investment opportunities.
We recommend that you continue to make your investments and don’t panic when the market drops. Since you are systematically investing, you should be able to average your price and do well.