After the GDP contraction in 2020 due to Covid-19 induced economic deceleration, India’s economic growth has bounced back in CY 2021, driven by pent-up consumer demand. Quantitative easing and accommodative policies have also helped corporate India to get back on track. Corporate profitability has been at record levels which is also getting reflected in the equity rally.

However, there are several questions that remain:

• Will risks to economic recovery remain?

• Will the equity rally sustain?

• What can you do to cope with the immediate short-term risks and also be on track to achieve your long-term goals?

Risks to India’s economic recovery

Though CPI inflation remains within RBI’s target range, elevated inflation levels in raw materials and crude prices may force the Central Bank to increase interest rates, thereby putting the recovery off track. The informal sector, where much of the India’s population works, is still reeling under the effects of the pandemic and subsequent economic distress.

Here’s an overview of the positives and negatives in India’s economic growth trajectory:

Source: 1 – Bloomberg 2 & 3 – oecd.org

Ride the long-term Growth Story with a Robust Asset Allocation Strategy

Instead of timing the market and missing out on long-term growth potential, you can adopt a simple and effective asset allocation strategy to deal with market cycles. This is based on our belief that assets are cyclical and there is no single winning asset class. Diversifying your portfolio with the right investment in equity, debt and gold, among other investments, is imperative for your financial health. This process is called Asset Allocation.

Asset Allocation can diversify the market risk which helps to can even reduce the downside risks and further your chances of achieving your financial goals.

Quantum’s 12-20-80 Asset Allocation Strategy to ride the market cycles

Use our tried and tested DIY (Do-It-Yourself) Asset Allocation strategy that you can follow to help you reach your financial goals while diversifying the portfolio which helps to reduce the downside risk.

Asset Allocation Strategy Building Blocks

1. Foundation Block: Emergency funds should be at the foundation of your portfolio. Set aside safe money worth 12 months of expenses in Quantum Liquid Fund that helps you prepare for emergencies and offers you insta-redemption option (up to Rs.50K) whenever you need.

2. Risk Reducing Block: You can invest in Gold’s risk-reducing characteristics and allocate 20% of your portfolio to the yellow metal. Though Gold prices have corrected from the highs touched in 2020, you can use the correction to build your allocation to gold.

3. Equity Block: Diversify the balance 80% across an equity bucket that is market cap, sector, or style agnostic.

Please note that the above suggested fund allocation only and is not to be considered as investment advice / recommendation, please seek independent professional advice, and arrive at an informed investment decision before making any investments.

Benefits of Quantum’s 12-20-80-Asset Allocation Strategy

While prudent asset allocation is one way to mitigate market uncertainty, ideal asset allocation is not static and need to be agile and dynamic.

Readymade Mutual Fund Solution

If you are one of those investors who would rather let a professional fund manager lead the direction on how to keep up with the diverse economic variables, then a readymade mutual fund solution with Quantum Multi Asset Fund of Fund is another option to consider. The fund manager has the flexibility to follow a regular rebalancing approach within each asset class of equity, debt and gold, thereby giving investors the potential to generate risk-adjusted returns through diversification of investments.

The long-term investor who is following the prudent DIY or the Readymade Asset Allocation Strategy need not worry about market levels or economic trends.

It’s time to take the opportunity to diversify your portfolio to ride India’s growth story.

Watch our recent webinar where our Fund Managers shared all about Asset Class Outlook & Economic View in the Current Market Scenario