K-shaped Recovery - Should You Panic?
Thursday, Sep 17, 2020
It is now emerging that the world at large will soon witness a K-shaped economic recovery.
We are witnessing a rising stock market despite millions of job losses.
Within sectors, a dominant behaviour is being observed.
Large value mergers are taking place in the market making indirect impact on small valued companies.
In the mid- and small-cap category, in particular, restaurants, hotels, real estate, airlines, etc., are struggling to just stay afloat.
A K- shaped recovery points to a growing gap between the wealthy and those that are not.
Or rather a gap between the well-planned investor and an average salaried individual who is able to meet expenses but has no savings for investments.
The Indian Finance Ministry believes we will see a V shaped recovery in India.
So will it be a K, V or even a U-shaped recovery?
In a recent newsletter, Atul Kumar, Fund Manager of Equities Funds at Quantum, shared his views on this.
According to Atul, although, economic recovery in India continues at a gradual pace, market valuations have come back to pre Covid-19 impact levels.
He notes that, in the near-term economic recovery does look dubious and although stock markets have rallied, only a handful of stocks have contributed to this.
He urges investors to adopt a long term vision as this is what can generate potentially strong long-term risk adjusted returns.
Further, Atul believes that since our economy is dependent on domestic consumption it is relatively insulated from global macroeconomics.
And he sees signs of positivity in the relatively fast recovery in rural economy and measures to ease liquidity all of which will stimulate growth.
So how should you as an investor react to this?
Follow some effective yet simple disciplined methods of investing to ensure that your wealth is protected.
Also ensure that you have these essentials in your tool box before you set out to weather any crisis.
✔ Contingency Fund that holds 12-18 months of Expenses
Create a contingency fund by keeping aside savings in a bank account or low-risk liquid fund. A contingency fund of twenty four months of personal expenses can protect you from such unforeseen situations.
✔ Clear Financial Goals
Try to plan the right way with clear financial end goals, to turn abstract ideas of your financial future into tangible estimates.
✔ A Well-diversified Portfolio that you can stick with
Build a prudent asset allocation plan based on individual long-term financial goals. Stick with these allocations over time, rather than reacting to market turbulences. This will help you capture your fair share of the investment returns.
Over the long term the right asset allocation will have a bigger impact on your investments than just picking the right stock or fund.
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Please visit – www.QuantumAMC.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.