InvestorQ : What are the safe portfolio investments in this COVID-19 volatility?
Nishita Gala made post

What are the safe portfolio investments in this COVID-19 volatility?

Aastha Awasthi answered.
2 months ago
Stock markets are inherently volatile, and the only option an investor has is to manage the volatility rather than expect to eliminate I completely. Covid19 was a black swan event, in that no one could predict it or see it coming. The resultant crash affected near all investors. However, after all the dust settled, the portfolios that bounced back fastest were ones that were based on the basic tenets of investing. The ideas are very simple, yet difficult to execute and hold on to for the long term.

Given below are some ideas that will help you build a resilient portfolio:

1) Gain in-depth knowledge about your investments- Whether you are investing in mutual funds, stocks, gold, or real estate, or all of the above, don’t depend on hearsay. Understand your financial goals and invest according to your needs and risk appetite. Someone who has a very high-risk appetite may like investing in stocks, but someone who prefers capital protection and safety of investment, may not like to do so. So make choices based on a clear understanding of your needs.

For eg- if you are investing in stocks, it is very important to have a good knowledge base before investing in stocks. You should invest time to research and analyze a particular stock before investing in it. Choosing the right stocks for investing requires a lot of effort and a very thorough analysis. Though you could argue that there are many experts who can recommend good stocks and make the process easier, it is always better to do the basic homework yourself. Relying on recommendations may hamper your investment style and may not be plausible for your goals.

2) Keep your emotions on a tight leash while investing: Emotions tend to blind our investment decisions in the sense that we tend to overlook our own analysis and follow what the majority is doing. It is also a human tendency to get bogged down when the markets fall and get too elated when the markets rise, making it difficult to follow through with our investment plan.
Diversification: Investors should diversify their portfolio across asset classes in a certain proportion so as to hedge their holdings against volatility and weakness in one or two groups. And one should diversify their portfolio in a focused manner such that the returns are balanced.

3) Rebalance your portfolio periodically: A timely review of the performance of your portfolio would keep you aligned with your investment goals. Failing to review your portfolio’s performance periodically can cost you a fortune. That does not mean you need to check on your portfolio daily and make changes accordingly. Generally, the ideal review period is 6months -1 year. One need not switch asset classes in case of small deviations from the intended results. But do keep a track of irregularities recurring every year. Especially in comparison to a relative benchmark.