Increasing Equity allocation During Market Volatility
The market has turned volatile due to various factors at play. Some of the key points of discussion are:
1. Global Liquidity Squeeze & rate cycle reversal.
2. Geo-Political tensions.
3. High Crude Oil prices
4. The INR vulnerability against USD
5. Inflation
6. Potential stress on corporate profitability
The list can go on and many micro & fundamental indicators may suggest sustained weakness or sideways movements of the markets. No one can predict the near term market trajectory but long term investing outcomes are quite impressive. Similar or even bigger troubles have spooked the markets in the past but if one looks from distance, these turn out to be opportunity in disguise.
Important to note:
There is an inverse relationship between good news & good prices. Any prudent investor understands that negative news flows are good for accumulation provided it’s not short term money for less than 3-5 years.
Such falls must be used to increase equity allocation. It could be additional Lump sum through STP or accelerated SIP (Say for 12-24 months)
When sentiments are down taking a decision to increase allocation to equity is difficult but rewarding.
However, such allocation should be in line with over all asset allocation strategy and by not compromising on over all liquidity.