How should you Invest this election season?

How should you Invest this election season?

30 Apr 2019

You would normally associate a significant increase in market volatility and turbulence in the equity markets during general elections and 2019, in all likelihood, is likely to be no exception or aberration. Equity investors should therefore brace for heightened volatility in the months of April & May and even beyond.

Year 2019 thus promises to be an eventful one for investors. The results of the general elections would be announced on 23rd May and this is the single biggest factor that will impact the Indian equity markets in 2019. On a historical basis, high volatility has been observed in the months immediately preceding the Lok Sabha elections. Once the results are announced, the markets may react adversely if there is no continuity in government or if a scenario of a fractured mandate arises.

There is no exceptional theme to play at this point of time. Most sectors are up and one must wait till the election results are out to put their money in quality names.

So, as a prudent investor, how should you manage your hard-earned money and invest during Elections 2019 and beyond to ensure that your financial plan stays on track and that your portfolio is adequately protected against the vagaries of the market?

In this blog, we attempt to answer this highly pertinent question, which we believe, may be uppermost in the minds of most investors at this point of time.

As per the experts, investors should consider high rated Corporate Debt instruments, Bank Fixed Deposits or Debt Mutual Funds. Debt funds can be considered as an alternative option to your existing debt/fixed income investments.

Besides domestic factors, Indian equity markets in 2019 are also likely to be affected by other external factors like the ongoing US-China trade war, the global geo-political environment & developments and the US Federal Reserve’s commentary and stance on interest rates. A trade deal with China appears within reach, but it’s too early to assume anything. There are reasons to think that it may end up as something less.

As high volatility has been observed in the months immediately preceding the Lok Sabha Elections, interest rate risk should be minimal in a fixed income securities portfolio and thus it is advisable to stay invested in short term to medium term debt instruments. For short term goals, always consider safer investments like bank deposits, liquid or low-duration or arbitrage funds.

A healthy mix of equity and debt investments will assist you to have a balanced and well-diversified investment portfolio. Investing systematically at regular intervals is the most efficient way for investors to minimize their portfolio risk in 2019. Investors should also focus on diversification to reduce possible volatility in a specific sector. One should always take calculated risks keeping in mind their financial goals and risk appetite.

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Capital preservation and risk minimization must be the primary focus of investors atleast during the first half of the year. For investors, the focus in 2019 should be on risk minimization and capital preservation rather than just chasing higher returns. Therefore, investors should seek adequate diversification of their portfolio across assets classes as follows rather than putting all eggs in one basket:-

  • Equity investments
  • Debt Instruments / fixed income instruments
  • Public Provident Fund (PPF)
  • Fixed deposits (FDs) & Recurring deposits (RDs)
  • Gold & Real Estate

We can summarize that 2019 is expected to be a volatile year. Therefore, investors should focus more on capital preservation and risk minimization with their investments. In such extraordinary times, capital preservation has to be an important aspect of wealth creation. Therefore, we can advise investors to stay less invested in equity-related instruments in the first half of the year and increase their portfolio in debt and other asset classes such as gold and real estate. Post results, a suitable call may be taken on investing elsewhere, such as equity-related instruments.

Here’s wishing you fabulous returns on your investments this election season. Tread carefully, tread wisely!

Founded in 2005 by new–age entrepreneur Abhishek Bansal, the Abans Group has evolved into a globally diversified conglomerate, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management. The Group is a comprehensive financial and non-financial services and solutions provider, aiming to provide end-to-end solutions to its clients.