To help investors navigate market volatility, Chirag Mehta, CIO, Quantum Mutual Fund suggests investors diversify across asset classes using the 12:20:80 asset allocation strategy. This was discussed at a recent webinar organized by Quantum MF.
Mehta expects economic recovery, though delayed, to continue. Persisiting inflation that could impact consumer discretionary spends, however, remains a risk. An extended Russia- Ukraine war that can disrupt the supply chain and push up commodity prices, can force central banks to act more aggressively. In this backdrop, he feels diversification would work best. More specifically, the suggested strategy is to park short-term money (12 months) in safe avenues such as liquid funds. The rest of the money can be split between equity and gold in 80:20 ratio. He suggests further diversification within each of these. “For example, in the equity bucket, you need to diversify across different styles and market cap,” says Chirag.
On fixed income, Pankaj Pathak, Fund Manager – Fixed Income, Quantum MF had this to say, “The US Fed has been very hawkish – talking about large rate hikes in this year and the next and also has plans to unwind the balance sheet. This will impact all asset classes. In India, the RBI hiked the interest rate out of turn, in May. They have also reduced the liquidity by hiking the CRR. But still, there is a possibility that they will continue to withdraw liquidity and continue to hike the repo rate. There is also a demand-supply imbalance that can impact the bond market.” Given this, he recommends investors looking for higher returns to have a holding period of at least more than three years to ride through the ongoing volatile period. For conservative short-term investors, he suggests liquid funds.
Ghazal Jain, Fund Manager, Alternative Investments, Quantum MF recommends gold ETFs for exposure to the precious metal. “In terms of purity, price efficiency, liquidity, and even regulation, gold ETFs form a good investment avenue,” she adds.
