Gold as an investment

Afraid of Nifty getting wilder? Look beyond 60/40 formula to protect portfolio

Sep 24, 2022

With Nifty 15 per cent below its all-time high and many analysts saying that valuations now look reasonable, investors are wondering whether they should increase their allocation to stocks and buy the fear on Dalal Street. However, geopolitical tensions, fears of global recession, interest rate hikes and rise in commodity prices may prolong the pain for equity investors.

So how should a risk-averse investor deploy money at this stage? A survey of 11 brokerages by ETMarkets suggests that long-term investors can deploy as much as 80 per cent of their capital into equities at this stage, while for the more conservative ones an equity allocation of anywhere between 30-40 per cent should give them a good night's sleep.

None of the brokerages recommend the traditional 60/40 portfolio strategy which suggests investing 60 per cent in equities and 40 per cent in debt.

“Risk-averse investors may follow the proportion of 30:50:10:10 across equity, debt, gold and other asset classes in a normal scenario and may stick to that with a small leeway,” Deepak Jasani, Head of Retail Research,

securities, said.

For new retail investors who might be going through a bearish phase in their portfolio as a number of largecap and midcap stocks have hit their 52-week lows in recent days, analysts say they must not forget that equities are not just a hedge against inflation but the asset class also offers the highest returns in comparison to other asset classes for those having a long-term investing horizon of 5 years or more.

If any investor is committed to remain invested for at least 5 years then one can even allocate 80 per cent of the portfolio, recommends Roop Bhootra - CEO, Investment Services, Anand Rathi Shares and Stock Brokers.

Siddarth Bhamre of

Broking, however, suggests that one must look at market valuations to decide the allocation strategy. “As valuation becomes attractive, allocation towards equity should increase. Contrary to the act of most of the participants, one should increase exposure to equities from here to next 10 per cent correction if it happens,” he says.

Brokerage recommendations on asset allocation strategy:

Pankaj Pandey, Head – Research, ICICIdirect

For the average investor, with a medium to long term horizon, equity should be part of a portfolio ranging from 40-70 per cent based on risk appetite and age.

Vinit Bolinjkar, Head of Research, Securities

We recommend a ratio of 50 per cent to equity, 40 per cent to debt and rest to other asset classes like gold. However, this is purely after the investor has secured a house for himself.

Yash Gupta - Equity Research Analyst, Angel One

We always suggest investors to be diversified across different asset classes. Assets allocation depends on the age and risk appetite of the investor, so investors in the age group of 20-35 can invest more in equities and the age group of 60+ should look for more investment in fixed income and gold.

Nishit Master, Portfolio Manager, Axis Securities

One should invest only that amount in equities that one can spare for at least three years if not more. A risk-averse investor who is building a portfolio now, assuming age is on his side, should allocate around 40 per cent of investible money in equities, 40 per cent in fixed income products with low duration, and 20 per cent in gold. If the equity markets correct further, one can increase allocation to equities further by reducing allocation to fixed income products.

Shiv Chanani, Head of Research, Elara Securities India

We believe that asset allocation should be tied to investor’s financial goals. A good rule of thumb for investors to follow is to follow the ‘100 minus age’ rule. (For example, if you are 20 year old, then you should invest 80 per cent of your portfolio in equities. Reduce it according to your age.)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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