Protect Your Wealth

The equity market around the world has now accepted the fact that the pandemic is still around and there is a serious threat of a second wave of the virus outbreaks. This has made it nervous and it finds itself on slippery ground anew. In fact, the equity market may lose some of the gains made in the last couple of months, which will only add to the losses made over the last one year. Equities have been down by more than 20 per cent in the last 12 months. Contrary to this, most of the pure debt funds have generated positive returns in the same duration and a few categories such as long duration and corporate bond funds have generated double-digit returns in a year.

This highlights the importance of diversification and asset allocation. Returns from different asset classes follow different cycles and may not generate similar returns every year. Therefore, build a portfolio that has the right asset allocation. Once you have built such a portfolio it becomes important to exercise discipline, monitor your portfolio regularly and most importantly, keep making required changes based on your financial goals. If you keep on rebalancing your portfolio at a regular interval, it will help you to protect the wealth generated in one asset and deploy in other assets that might be undervalued.

Historically, there is a high correlation between protecting your wealth and long-term outperformance. This is because protecting yourself from losses in falling markets leaves more capital to grow when the market rises again. Our cover story this time takes a 360-degree view on how you should monitor your portfolio which will help you protect your wealth and also guide you to generate better returns in the long run. We hope that articles from the issue will help you take informed decisions. Your valuable feedback and suggestions are most welcome! 

SHASHIKANT