Sensex, Nifty hit multiple peaks in December: 5 tips to handle your portfolio in a bull run
After hitting multiple record highs in December and crossing many milestones, the Indian benchmark indices were muted in trade today, December 13, ahead of the US Fed meeting outcome later today. Moreover, the market sentiment was also impacted by profit booking.
The 30-share BSE Sensex ended higher by 33.57 points or 0.05% at 69,584.60 level while the Nifty 50 closed at 20,926.35 level, up 19.95 points or 0.1%.
According to Nitin Rao, CEO of InCred Wealth, the current valuations are reasonable, supported by strong economic fundamentals and a positive market sentiment. This suggests that markets are likely to continue trending upward alongside economic growth, he predicted.
Rao explains how to handle portfolio in any bull-case scenario.
1) Regularly review and rebalance your portfolio to maintain your target asset allocation. For investors, it is desirable to rebalance portfolios by trimming any overweight position and maintaining some liquidity for a probable opportunity. Maintaining a well-balanced portfolio requires diligence and a commitment to regularly reviewing and rebalancing. This proactive approach ensures that your investments remain aligned with your financial objectives, providing a foundation for long-term financial success.
2) Continue your SIPs through market fluctuations for long-term wealth creation. Systematic Investment Plans (SIPs) offer a disciplined and systematic approach to investing in the financial markets. While market fluctuations are inevitable, continuing your SIPs through these variations can contribute significantly to long-term wealth creation. SIPs allow investors to benefit from rupee cost averaging. By investing a fixed amount regularly, you buy more units when prices are low and fewer units when prices are high. This averages out the overall cost per unit over time. Attempting to time the market by waiting for the ‘right’ moment to invest can be challenging. SIPs help mitigate timing risks by spreading your investments over time, reducing the impact of market volatility on your overall portfolio. During market downturns, SIPs provide an opportunity to accumulate more units at lower prices. This positions your portfolio for potential capital appreciation when markets recover.
3) Resist chasing short-term gains and avoid investing based on emotions and the urge to make impulsive decisions based on market noise. In the dynamic world of investing, the allure of short-term gains and the emotional pull of market noise can lead to impulsive decisions that may jeopardise long-term financial goals. It’s crucial to resist the temptation of chasing short-term gains and steer clear of emotional investing. Short-term market noise, often fueled by news and daily fluctuations, can create a sense of urgency. Reacting impulsively to such noise may lead to decisions that don’t align with your overarching financial plan. Emotions like fear, greed, and anxiety can cloud rational judgment. Making investment decisions based on emotional impulses may result in buying at market peaks or selling during downturns, compromising overall portfolio performance.
4) Stick to your investment plan and avoid making emotional trades. Don’t be lured by stocks with attractive prices but lack underlying strength. Your investment plan serves as a blueprint tailored to your financial goals, risk tolerance, and time horizon. Consistently following this plan provides a structured and reliable path to wealth accumulation. While attractive stock prices may be tempting, it’s crucial to assess the underlying strength of the investment. Stocks with weak fundamentals may not provide sustainable growth, and investing based solely on price can lead to suboptimal outcomes. By sticking to your investment plan and resisting emotional trades, you position yourself for a more secure and prosperous financial future. The discipline to stay the course even in turbulent times is a hallmark of successful long-term investors.
5) Always prioritise companies with strong financials and long-term prospects. Companies with strong financials exhibit stability and resilience, weathering economic uncertainties and market fluctuations more effectively. This provides a solid foundation for sustained growth and performance. Companies with strong financials are often better equipped to sustain dividend payments. For income-seeking investors, prioritising such companies can provide a reliable income stream, enhancing the overall stability of the investment portfolio. By prioritising companies with strong financials and a commitment to long-term growth, you position your investment portfolio for stability, resilience, and the potential for enduring success. This strategic approach enhances the likelihood of achieving your financial goals over the long term.
Strategy
Overall, Rao advised investors to consider increasing their equity allocation slightly to capitalise on the current market momentum, particularly in the lead-up to elections.
Average out investments, he recommended.
“Use market dips to invest additional funds and build your portfolio at lower prices. Remember, even in a bull market, unexpected events and systemic risks can lead to significant downturns. Maintain a diversified portfolio and ensure proper debt allocation to mitigate potential losses. Don’t abandon your long-term asset allocation strategy in pursuit of short-term gains,” suggested the expert.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.
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Published: 13 Dec 2023, 05:12 PM IST
