Prince Harry and Megan Markle announced a step back from their positions as senior members of Britain's Royal Family after an eventful year, or shall I say a turbulent year. The year saw the birth of their first child and constant gaze under the media lens. Maybe it was too much to take in and the couple decided that they would rather review the situation. Being the first month of the year, investors can also decide to take a step back and review their portfolios. The investment goals that they set can be reviewed and portfolio rebalancing can be done accordingly.
The year gone by was a good year for equities. The Nifty 50 gave a return of ~14% return. However, the gains were hardly broad-based as a substantial portion of these returns were generated by a few large-cap stocks in the index. The mid and small-cap indices ended in the negative zone. The fixed income market had its own share of volatility, as the credit crunch in the Non-Banking Financial Corporation (NBFCs) and shadow banking was felt across the board. Most investors were largely cautious while investing in fixed income funds. Investors also looked at options like hybrid funds, asset allocator funds and some theme-based funds.
Investors can allocate a certain portion of the portfolio for contra investment options this year. The returns for most of the mid and small-cap funds last year were ordinary. A majority of the stocks in this segment have corrected from their highs and make a compelling investment argument from a valuation perspective. However, investors need to carefully choose the portfolio manager before investing in mid and small-cap funds. On the fixed income part, the credit rating agencies had more downgrades than upgrades in the last 18 months. The valuations have been adjusted accordingly in most of the funds. However, valuation gains will kick in once the complete payment is received on such bonds in the portfolio. Investors need to exercise patience and choose wisely to ensure good returns from the fixed income portion of the portfolios. Considering that increased volatility has become a part of our markets, investors may also include asset allocation funds to their portfolio.
As we embrace for an eventful year ahead, all it takes is a little bit of courage to make tough decisions. Every once in a while, one has to make these decisions, be it the royalty or investors.