A 15-point "Cheat Sheet" For Investors Right Now
1. We may be witnessing early signs of a recovery in Real Estate. With new launch sales of 500 units across the top 7 cities of India in January 2018, new launch sales have doubled from December 2017. Don't be in a hurry to sell. If you can wait a couple of more years, wait. We're still in a buyer's market - but the trend may begin to shift over the medium term.
2. If you've been sitting purely on Financial Assets for the past few years, now is the time to consider adding Real Estate to your portfolio again - but with a long-term view, not with an intent to 'flip'
3. The secular bull market in equities is due for a long pause. Make sure you're not overinvested into equities at this point.
4. Although we may actually witness the much-awaited earnings growth in equities coming through this year - the unfortunate fact is that a year or so of earnings growth is already priced in - so that shouldn't be a reason for you to throw caution to the wind!
5. If you're overweight equity mutual funds right now, start 6-month STP's to rebalance at least half your portfolio into debt funds. Don't make the mistake of aiming to rebalance in one shot!
6. Do not let the introduction of LTCG on equities influence your asset allocation decisions. Tax efficiency, while desirable, should not be the driver of your investment decisions.
7. Allow your equity SIP's to continue uninterrupted. Volatility, in the long run, will play to your advantage. Rebalance the accumulated lump sums periodically.
8. Add some sectoral funds to your Mutual Fund portfolio -Financials, Infrastructure and Pharma are worthy of consideration. Do not let sectoral funds exceed 15% of your overall portfolio of Financial Assets.
9. Within your fixed income portfolio, allocate 70% to accrual funds and corporate bond funds, and 30% to dynamic bond funds or longer duration funds.
10. Bitcoin and other cryptocurrencies are on their way down a slippery slope. Collectively, they represent a risk that's not worth taking.
11. Don't be greedy or hang on to your previously held points of view. Be fluid in your beliefs. Remember, earning 18% absolute returns from half your portfolio over the next two years is much better than earning no returns from your entire portfolio for two years (a distinct possibility for lump sum investors into equities)
12. Most IPO's being launched right now are OFS (Offer for Sale), which means that the IPO is really a route for promoters to reduce their holdings, and not for the company to receive any new capital. As a broad thumb rule, most OFS IPO's are best avoided.
13. ULIP's do not trump Mutual Funds simply by virtue of their newly procured "better tax efficiency" status. Consider your decision to buy a ULIP very carefully - for starters, avoid any ULIP that has heavy inbuilt costs or is relatively new to the market. Agents will try to push you into them - hard.
14. If you must err, err on the side of caution right now. This isn't the time to be overtly aggressive with your money. Keep a low profile in 2018!
15. And lastly, completely avoid traditional life insurance policies this year. Beneath their fancy veneer, you'll find a poor investment that will likely yield you sub-6% returns over a very long-time frame.
