To help investors navigate the market volatility, Chirag Mehta, CIO, Quantum Mutual Fund suggests investors to diversify across asset classes using the 12:20:80 asset allocation strategy. This was discussed in a recent webinar organized by Quantum MF.
Mehta expects the economic recovery, though delayed, to continue. However, sustaining inflation that could impact consumer discretionary spending remains a risk. An extended Russo-Ukraine war that could disrupt supply chains and drive up commodity prices could force central banks to act more aggressively. Against this background, he feels that diversification would work best. More specifically, the suggested strategy is to park short-term funds (12 months) in safer avenues such as liquid funds. The rest can be divided between Equity and Gold in the ratio of 80:20. He suggests further diversification within each of these. “For example, in the equity bucket, you need to diversify across different styles and market caps,” says Chirag.
On Fixed Income, Pankaj Pathak, Fund Manager – Fixed Income, Quantum MF had this to say, “The US Fed is very bullish – talking about big rate hikes this year and next and opening up the balance sheet.” It will impact all asset classes. In India, RBI hiked interest rate alternately in May. They have also infused liquidity by raising CRR. But still, there is a possibility that they Will continue to infuse liquidity and continue to hike the repo rate. There is also a demand-supply imbalance that could impact the bond market.” In view of this, he advises investors to have a holding period of at least not more than three years to ride through the ongoing volatile period in search of higher returns. For conservative short-term investors, he suggests liquid funds.
Ghazal Jain, Fund Manager, Alternative Investments, Quantum MF recommends Gold ETFs for investing in the precious metal. “In terms of purity, price efficiency, liquidity and even regulation, gold ETFs are a good investment avenue,” she adds.