Key takeaways from the session on portfolio allocation with Sonam Srivastava, founder of Wright Research:
Asset allocation is the best tool we have to tackle market volatility. Identify the different types of assets, and then understand which assets are favoured by the market. You ideally want to allocate your funds to the apt sector at the right time.
How frequently do you need to reassess your portfolio and rebalance your allocation?
Asset allocation doesn’t have to be active. But you should at least review your portfolio on a 6 month to a yearly basis because markets shift in these time frames.
A regime shift is when there are major shifts in the economy - a change in the administration, for example. This is when you need to relook at your portfolio and rebalance.
How does asset allocation shift with an investor’s risk profile?
High risk - High on equity (80%), low on bonds (20%)
Moderate risk - Higher on bonds (60%), lower equity (40%)
Low risk - High on bonds (80%), low on equity (20%)
How does Wright look at allocation? “Wright tactically shifts allocation by taking into account short and long term trends. When the fed tapering takes place, we tend to allocate funds to US bonds. When the market is more favourable, we allocate a larger % to equity.”
"Asset allocation is about which sector and asset class the economy is favouring. With the current real estate boom we are focusing more on real estate. But if fed rates increase, money moves into US bonds."
2022: likely to see dampened returns from equity markets compared to 2020 & 2021, but the earnings are great, which is likely to affect the performance. Market is likely to digest the tapering of the curve better than it did in 2013 despite inflation effects.
How do you think of allocation b/w US and India? India is likely to outperform US in the long run, but it’s advisable to diversify globally by investing in the US because based on research, there will be certain time periods where US will most definitely outperform India.
For all those who attended, thanks for being there, and we’re continuously working on planning more and better sessions like this one!