Sticking to basics the best investment strategy for all

It’s this time of the year when you get to hear and mostly expect to hear about the forecasts or prophesy of the future, particularly about the coming year. What markets turn out to be, how economy will perform, what investment avenues will perform or perish and even what sectors or funds to bet on, etc.

The list seems to be never-ending. It’s always easy to forecast as there’s no accountability but it is so because either the readers don’t bother at the first place or are really not concerned to evaluate at the end of the year.

This is also the time when we start making a list of resolutions for the New Year ranging from losing a few kilos of weight to increasing the savings to learning a new language/skill, etc. and so also is the time to dish out some expert opinion on making savings or investments and altering investment pattern/behavior for your benefit.

According to USnews.com, 80 per cent of the resolutions fail by the 2nd week of February and only a meagre 8 per cent end up succeeding. I’m not going to dwell on why it happens or how one could keep up their resolutions going. Instead, I take this opportunity to relook at what has gone by and where were the pitfalls and how to overcome this time around.

On the back of a first positive synchronized growth across the regions in almost a decade, a global rally in equities has persisted for the most part of the year.

India was no exception and we found more reasons (domestic political gains) as an indication to bolster this claim. Despite the global political turmoil with the new administration in the US and their reversal of many policies, growth continued across the planet.

Nifty clocked about 29 per cent upswing, while the small and mid-cap indices have appreciated by 60 per cent and 48 per cent respectively, these are phenomenal returns especially coming after possibly once-in-our-lifetime event of demonetisation, PSU bank recapitalization and a grand structural tax reform of GST.

Surprisingly, the RBI has maintained a hawkish tone on the inflation and only budged a bit on the interest rate cut, contrary to the govt’s expectations. Just check last year’s predictions on the stock markets/RBI policy and you would wonder if anyone got it right. Forecasting is, hence, an exercise to say what will happen in future and explain why it didn’t.

Though, we’ve been cautious specifically during the first quarter of the year, we remained overweight on equities. This thoughtful approach has resulted to approach the equity markets in a staggered manner with top-ups during any dips/corrections. This tactic has yielded good rewards while nullifying the risk, generating an attractive risk to reward.

What you need to understand from this is that, the only golden rule for success in investing is to stick to basics and not to complicate. What was your approach during last year? Where do you think your style of investing worked or not? How would you have approached the same situation if you were aware of the situations?

What’s the insurance or leverage you have? Is your current portfolio in sync with your goals, despite results are good or bad last year? Have you noticed any change in portfolio risk? These are the questions to be asked. Yes, you could play bet on certain sectors that you’ve identified, researched and analysed that you think would benefit in the coming year.

But, how much risk are you going to take or what percentage of your portfolio would be exposed to this? Again, what’s your fall back, do you have a back-up plan/strategy?
I would encourage to identify your investing pattern, rejig the priorities, exert diligence and exude persistence.

In the hindsight, retrospect the shortcomings and introspect on the methodology, and re-carve a strategy that equips the future. As Oscar Wilde said, to expect the unexpected shows a thoroughly modern intellect. Happy New Year and Happy Investing.

(The author is Head-Research & Planning at Wealocity, a Wealth Management firm and could be reached at [email protected])