Time right to frame a model investment portfolio

[Sukumar.N]

Planners advocating model investment portfolio for investors for long
term wealth creation. Amid greater uncertainty, frozen credit lines
and choppy markets, financial planners are advocating model investment
portfolio for retail investors for long term wealth creation.

Allocating assets in all classes to suit different risk profiles, they
say the time is right to take an aggressive approach towards
investments.

Such an investment portfolio is inclusive of products from different
asset classes. However, it is only the risk appetite of an investor
that determines the exposure against any particular asset class.

Said Amar Pandit, director, My Financial Advisor, “Be conservative in
buoyant market and aggressive in doom market. This market meltdown has
catered to a host of investment opportunities in asset classes
including debt, equity, gold and a few others.”

According to financial planners, investors with high and moderate risk
appetite can invest 60-75 per cent and around 40 per cent respectively
of their total investments in equities.

Equity investments have to be either through diversified large cap
equity funds (offered by frontline mutual fund houses) or picking up
shares of blue chip companies (currently available at a cheaper rate)
without any sector bias with 3-5 years timeline.

Pointed out Swapnil Pawar, director – Park Financial Advisors,
“Investing in blue chip companies can be done either through piece-
meal basis – ‘buy at every decline’ in this gloom market or on bulk
investment basis wherein you must not look at the stock price every
day.”

On the other hand, bank deposits, public provident fund, balanced
funds, guilt fund and gold have emerged as the preferred choice of
financial planners for low risk investors.

While bank fixed deposits give assured returns in this era of layoffs,
guilt fund glitters amidst repeated rate cuts by RBI. The latter can
fetch up to 10-12 per cent return per annum with the expectation of
further rate cuts by the central bank by another 1-1.5 per cent.

“Investors should go for only long term guilt fund investing in 5
years plus papers,” added Pawar.Investing 5-10 per cent in gold both
in the form of gold exchange traded fund (ETF) and physical gold is
also seen as a good hedging tool.

Besides, financial planners are quite convinced of gold’s long term
worth expecting the gold price to go up manifold. Investing in PPF
will give two way benefits including 8 per cent rate of interest per
annum and tax relief of maximum Rs 70,000 per annum.

“In times of recession, like now, when job cuts are quite frequent,
investment in PPF and FDs will give additional support to your
livelihood,” feels Pandit of My Financial Advisor.

Real estate, already bruised by the liquidity crunch, too holds
investment promise. Though distressed sale of property seems
attractive presently, a correction in prices up to 50 per cent is in
the offing, predict analysts.

“In the coming six months, there will be huge correction in real
estate prices. Hold your breath till that time for realty investment,”
commented Sonu Bhasin, President – retail financing, Axis Bank.

She suggests retail investors scout for opportunities over 5-7 years
timeline, instead of falling prey to hearsay.

N.Sukumar
Research Analyst
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