When an asset class like equity goes through a prolonged time correction and fails to deliver returns, what should an investor do? Moving focus into other asset classes like precious metals, which have recently delivered returns, is almost a natural reflex action. Looking at newer markets other than investing in your own is a new thing Indians are aggressively pursuing. Spotting new product categories within equity like AIF and SIF is a novelty trade that has many takers.
But, for an investor with high long-term conviction in the economy of our country, with ample belief in equity as an asset class, the need of the hour is anything but product novelty, new asset opportunities, or new strategies. What high conviction investors need now is sustained investing rigour, steady focus on valuation, disciplined deployment of capital in the right themes, and patient holding power.
Moving money around too often can potentially trap investors in the wrong assets. Taking money out to buy exotic real estate overseas can cause prolonged pain. Exotic products without much evidence of performance can leave investors saddled with decision regret for years. An investor is better off keeping his investing simple and within India right now. The bet should be on a prolonged macro reset when the economy recovers and moves gradually to a better place.
Portfolios filled with high-risk products chasing growth will need a swift risk reset, where exposure to such products needs to be drastically reduced. Whenever our economy recovered from a major macro reset, it took a lot of time, caused a lot of pain, and tested every investor’s risk management.
The coming year will test the ability of investors to adapt, change direction, shift track, and move forward in a fast-changing economic scenario. The nimble, future-focused investors will clearly outperform the past returns-obsessed ones. The challenge before every investor now is to act right, think fast, shift portfolio positioning, show conviction in our economy, and bet on the right equity assets.
The battle is now going to be fought more in the investor’s mind than in the stock markets.
