2021 is >~2 months away, and a 2019 disease is yet ever-so relevant. Continuing to be a front-page feature, it’s the biggest socio-economic crisis humanity has faced this century. Yes, we write about Covid 19, and its gain-&pain relation with markets.
Harboring a sweet-&-salty relationship, the viral virus forced the world into lockdowns. After months of stillness, the world’s united attempt in stopping the spread of the virus as borne fruit as India looks at Unlocking 5.0 via Relief Package 2.0
Markets reacted accordingly by wiping out trillions in wealth only to bounce back by 50%+ on the upside since its march lows. With Volatility as its theme (all-time high levels), markets have delivered and not delivered.
As investors raise eyebrows questioning the uncertainty, they justifiably complaint about the difference between returns realized and returns lost.
Before we break-down the reasons for the aforementioned, let us paint the rainbow market’s in its true colors.
Right off the bat, we observe that markets have solely neared their pre-covid levels, and not equalled and surpassed them thus subduing investor growth.
Choosy Sectors Are Influencing The Market’s Vectors
In our prior “The Signal” pieces, we educated investors on how the markets bore inflated levels because of rally seen 5% of index stocks. In fact, the index sans-reliance would today be 10%+ of its levels!
This time we applied a similar study to sectors (on a global level), and unsurprisingly yielded the same results. Table below highlights how much of the market’s shift from fever to fervor has been attributed by Consumer Spending, AI, and API.
The data speaks volumes of today’s levels being representative of sector-focused gains, than a true representation! This presents good news, for now we know the unrealized upside potential markets still have to offer! So, what are you waiting for? Get in touch with us and curate your portfolio to profit off of opportunities and not let it remain a cost.
If Nifty Is A Lake, Then MF Stock Universe Is An Ocean
The Indians in population and trading make for one of the biggest indices in the world. Boasting an investment universe of 5,000+ companies, only 50 of them account for our country’s representative index in Nifty 50. That’s a mere 1%!
India’s evergreen investment product in Mutual Funds smoothens the width to a certain extent by looking at the top ~1,500 companies, thus accounting for ~30% of total investable universe.
Hence, the share of Nifty’s representation jumps to 10%. But this brings a bigger problem in contribution as the remaining 90% of the stock universe is composed of Mid & Small-caps.
The table below highlights division and distribution of market-caps across MF universe, and their YTD returns:
As can be seen from above, the shallow returns garnered by the indices, courtesy of the viral virus has kept returns at bay. As economic indicators start faring well and expediting adoption to “New Normal”, we can expect the market to close current gaps and hint towards to being onwards and upwards.
So far we have pointed out 2 key stress points that have kept investment potential lack-lustre. This can be worrying for many as they may be afar from realising set objectives. Worry not, we at Fisdom foresaw this and are prepared with 1 solution for all your issues.
Asset Allocation – An All-Weather Investment Strategy
The answer lies in the magic of Asset Allocation. Through shrewd portfolio structuring, you can tweak 2 vital elements of goal-based investing. They are:
Investment Time Horizon
Every asset class has its “season”, and thus dynamic portfolios are poised to win most. Every element has their designated role ranging from generating alpha to acting as hedge, thus helping portfolio be a hunter and not the hunted.
The lower co-relation amongst portfolio constituents is a bonus as it curb-stomps cannibalizing of contributions.
You can’t control market volatility, but you can limit its effects on your portfolio. To choose to complaint or to Gain is a mindest which is reflected in your portfolio health and wealth. Be It books or speeches, sound asset allocation merits a special mention when talking of investing. And in transitioning times of Co-vid to Go-Vid even more so!
Your portfolio in red? Well put a “stop” to it by getting in touch with us. In 1 download and 3 clicks, lets colour the portfolio Green, in “Signal” and monies.
Usually This Is Where Stop, But Today We Gift You A Learning Extra!
The year’s volatility and uncertainty is going to get a kicker in the coming 2 weeks as the US election nears. The winner between the Republicans and Democrats bears influence on market movements, as the winner gets to set the trajectory of the economy for the next 4 years.
Is the ‘expected’ upcoming rattle left you off the battle? If so, then the graph below will soothe your nerves:
Investing is a hiccup-full journey. In a periodical 4 year manner, the markets view the event as another speed-breaker to tide over.
And hey, no matter the political colour of the president (Red/Blue), they wish towards the same goal of accelerating country’s economy and the world. For if the world grows, they grow.
So, don’t let the elections “decide” your portfolio positioning, but instead you “vote” to stay invested!
If you have any anecdote to share with us, then write away!