How to Build Your Portfolio for Retirement in the Current Bear Market

Currently, bear markets are hovering around the world as investors panic sell-off on concerns of a global economic slowdown after the US Federal Reserve raised its third aggressive rate by 75 basis points. Indications of a further hike of 125 basis points by the end of December 2022 have shaken the markets. Last week, both the Sensex and Nifty 50 fell around 2%. Last Friday itself, the market fell more than the sell-off 4.90 lakh crore investors’ assets. There is hesitation among investors and a bullish move seems unlikely, at least in the short term. In such a case, it becomes important to understand how to build your portfolio for the long term if you consider equities as a key mechanism, especially for retirement planning. In fact, this bearish tone of the markets can be used to build a valuable portfolio for a prosperous future.

Last week on Friday, the Sensex closed at 58,098.92, down 1020.80 points or 1.73%. Meanwhile, Nifty 50 fell 302.45 points or 1.72% to end at 17,327.35. heavy shares The market was under pressure to pull. Banking stocks were the biggest hit, while capital goods, consumer durables and auto stocks also saw heavy selling pressure. selloff in mid Cap And small-cap stocks underperformed further. Overall, a broad-based bearish tone was recorded.

Market capitalization of companies listed on BSE ended on 2,76,64,566.79 crore till the end of September 23 4,90,162.55 crore as compared to the previous day. Market capitalization declined in the last four trading sessions between September 19 and September 23 6,77,646.74 crores.

Talking about the performance of the market, Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, said, “Equity markets traded lower mainly tracking developments in overseas markets, especially the US. Fed rate The stance of growth and rate hikes will continue as long as inflation is adequately displayed in an aggressive and bullish Fed.Even if it has the cost of a slight economic growth, it said outlook This time the Fed policy comes with a projection of lower growth and gradually rising unemployment. This was to the dismay of many market participants, who believe it to be a period of declining US economic growth. It is confirmed to enter, a growth that is already slow. It has affected equity markets, and it has sent a worldwide buzz. More than anything, it is the expectation of higher interest rates and less liquidity that on the minds of many investors.”

Going forward, Shrikant Chauhan, Head of Equity Research (Retail) at Kotak Securities believes that for the domestic market, one of the major developments in the near future is the upcoming RBI monetary policy.

Thomas said, “High inflation, a widening trade deficit, weak currencies, and a possible slowdown in growth could trap some emerging market economies. The RBI policy is expected in the next few days, and the anchoring of the policy will be its exposure to the market. The impact was keenly watched at a time when the economy is witnessing high credit growth and lack of money market liquidity.”

Whereas Vinod Nair, head of research, Geojit Financial Services, said, “A rise in US 10-year bond yields and a strong dollar index influenced FIIs to flee emerging markets. The collapse in liquidity in the banking system, a weaker currency, and A current premium valuation has put the market outlook bearish for the near term.With aggressive monetary policy action by central banks, global growth engines are in a slowdown, while India is currently on a pick-up in credit growth. The current volatility may persist for some time. Investors are advised to wait and see till the dust settles.”

How should you build your portfolio in a bearish market?

Surjit Singh Arora, Portfolio Manager, PGIM India Portfolio Management Services, said, “Given the uncertain environment and slowdown in global growth, CY22 could be a challenging year for the markets. However, from a 3- to 5-year perspective, we are looking at Indian Remain constructive. Equity given the fact that the Indian economy will be one of the fastest growing economies in the world.”

The portfolio manager pointed out some important principles that one should keep in mind when it comes to money management. These are:

spend less than you earn

You can be successful only by having more income than expenses every month. By spending less than you earn, you can withdraw money for the future instead of living pay checks to pay off the check.

Invest in equities for long term

Compounding is the 8th wonder of the world. He who understands it, benefits from it. As a general rule, 100% of the individual’s age = % of equity investments; That is, if a person is 30 years old, ideally he should have 70% of his investments in equities (preferably diversified equity funds). To take advantage of compounding, one should invest for at least 10 years. “The timing of the market is more important than the timing of the market.

plan for retirement

As per the rules of thumb, the retirement corpus should be 30 times the annual expenditure in the year of retirement. For example, if inflation is 5% and you use the Rule of 72 as a rule of thumb, 72/5 would mean 14.4 years, or roughly 15 years. This means that an amount at 5% inflation will double in that amount of time. In other words, the annual expenditure of will double to 3 lakhs 6 lakhs in 15 years and again to 12 lakhs in 30 years. So, the current annual expenditure of a person retiring at the age of 60 at the age of 30 will be became 3 lakhs 1.2 million. He needs 30 times his living expenses – so his retirement amount should be approx. 3.6 crores.

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.

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