Tough there is a wartime situation just a few thousands of kilometers from India’s borders, let there not be a crisis in your investments. Do not panic and if the missiles are flying, do not let your hard efforts and planning also fly with the missiles.
Experts guide us to our investment priorities during this crisis and they have one word of advice – let your investment doctrine be your guide, not the war.
“Investors should first review their overall portfolio strategy, before making any changes in their portfolio,” says Amitabh Lara, Executive Director, Anand Rathi Wealth Limited.
Factors to consider
The investor, before making any changes in their portfolio must look at their investment objective, risk profile, return expectations, and asset allocation. Only after these factors are reviewed should any restructuring be considered.
If the existing allocation is aligned with long-term goals, then changes may not be required even during uncertain market or geopolitical conditions.
The investor should also consider whether the objective of portfolio restructuring should be based on long-term asset allocation, and due to a change in investment objectives or if the portfolio has deviated from the intended allocation, not due to short-term market uncertainties.
“Rebalancing should happen gradually over time,” says Vineet Agrawal, co-founder of Jiraaf. Knee-jerk reactions, panic selling, and rushed buying should be avoided during periods of market volatility.
A better approach would be to make fresh allocations and gradually raise exposure to short- and medium-term bonds. This brings more fixed returns and regular payouts into the portfolio without forcing investors into emotional decisions. The focus should be on measured rebalancing, not abrupt portfolio shifts.
“The current environment calls for a shift towards balance rather than aggressive positioning,” says Tushar Sharma, Co-Founder, Bondbay. Within fixed income, investors should increase allocation to high quality bonds and reduce exposure to lower rated credit. Duration should be managed carefully, with preference for short to medium tenor instruments to reduce volatility.
Hedge against current uncertainty
From a broader portfolio perspective, equities should be moderated rather than exited, with focus on resilient sectors. A small allocation to gold or silver can act as a hedge against geopolitical uncertainty and currency volatility. “However, bonds should form the core stabilising component in this phase,” says Sharma.
Portfolio rebalancing should ideally be carried out when there is a change in financial goals, risk tolerance has changed, time horizon has reduced, or market movements have caused the allocation to move significantly away from the original mix of equity and debt.
“The allocation to bonds in a portfolio should not be decided purely based on current geopolitical events, but on asset allocation suitable for the investor’s time horizon and risk profile,” suggests Lara. For instance, a portfolio of ₹10 lakhs for a long-term investor can be diversified across 80:20 allocation between equity and debt.
In the current market situation, instead of investing the entire amount in equities at once, investors may follow a staggered investment strategy. Initially, park the lump sum in Ultra short-term funds, Liquid funds, Money market / low duration debt funds and gradually shift money into equities over 6 to 8 weeks through staggered investing. “This approach helps reduce timing risk and avoids investing the entire amount during a volatile phase,” say experts.
“For investors, instead of buying bonds directly, debt mutual funds may be more suitable as they offer diversification and professional management,” says Lara. For investors in the higher tax bracket, arbitrage funds can be considered for part of the debt allocation, as they are often more tax-efficient compared to traditional debt funds while still offering relatively low volatility.
“In the current environment, a balanced allocation would tilt slightly in favour of fixed income,” says Sharma. For a ₹10 lakh portfolio, an allocation of around 40 to 50 per cent in bonds and debt instruments appears reasonable. This ensures stability and predictable income while still allowing participation in growth assets.
The remaining allocation can be distributed across equities for long term growth and a smaller portion in gold or silver as a hedge.
