While the markets were focused on equities, yields on the 10-Year gilt quietly rose to cross 8% again. With other asset classes like real estate not doing much, and returns from equities clearly slowing down, debt makes a clear comeback as an option for conservative investors.

Over the next few months, investors can build a compact portfolio with the right mix of equity and debt. In fact, this is a good time to re-look at asset allocation, carefully rejig the allocation to each asset class, and build both debt and equity portfolios for the medium term. Importantly, choosing investments must be done in a way that ensures long-term tax efficiency.

Debt investments must be chosen keeping in mind a longer time horizon. Locking into higher returns from debt investments must happen when interest rates trend higher. This requires a carefully crafted investment strategy. Equity investing must also ensure choices are aligned to medium portfolio out performance.

Past performance will now tend to confuse our choices. One must learn to think beyond past performance and focus on what lies ahead.

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