Investing: Paras Adenwala

I have invested Rs 6 lakh in the equity market. In the last four months, my portfolio got eroded by almost 30 per cent. It has recovered a little, but not entirely. I want to exit the market and park my funds in safer instruments. Which instruments should I invest in, which will ensure minimal loss?

Markets tend to move in cycles. After the financial meltdown, we saw a strong recovery in 2009, which continued till the end of 2010. Corrections tend to follow strong recoveries. Markets will resume the uptrend after the completion of the current correction. India continues to be a growth engine for the world. Thus, it is safe to assume that it will keep attracting fund flows. So, it will be unwise to exit the market at these levels. You may want to shuffle your portfolio, so that it comprises fundamentally robust stocks. However, if you are still keen on exiting, do it during an uptrend to minimise your losses. The money that you realise from this sale could be redeployed into fixed maturity plans of mutual funds, postal savings, the Public Provident Fund or bank fixed deposits. 

 

On the back of rising inflation, are commodity mutual funds a good idea to invest in? What are the pros and cons? How much of my portfolio should these constitute?
Investing in commodities is a good way of benefiting from inflation. Investors could use either the exchange-traded funds (ETFs) or the mutual fund route to invest in commodities. For someone who can take extra risk, commodity futures are also an avenue. However, commodity mutual funds are the best route, as the money is being entrusted to experts who understand those markets. 

While commodities as asset classes help you benefit from inflation, these are also the most volatile. The volatility is induced by developments happening across the globe. The risk to commodities could be fundamental, technical or even geopolitical. Hence, an exposure to these should be capped at 10 per cent of the portfolio. 

Many fund houses offer daily, weekly and monthly systematic investment plans (SIPs). What are the advantages of the daily and weekly ones? At present, I invest through monthly SIPs.
Determine the frequency of SIPs depending on your cash flows and investment horizon. If your investment horizon is for the long term — three years or more — a monthly SIP should be fine, assuming your cash flows are comfortable. If the investment horizon is one year, you could consider a weekly SIP, though it could put some pressure on your cash flows. 

I recently read that silver has given phenomenal returns in the past few months. In the absence of silver ETFs, what are the options for investing in this metal?
Silver has performed well in the short and the long term. However, it is a good idea to buy an asset class when the chips are down. Participating in a frenzy could expose you to downside risks. Should you still choose to invest in silver, there are only two options available — physical silver and silver futures. In case your investment horizon is long, taking physical delivery of the metal is advisable. 

The writer is managing director & principal portfolio manager, Capital Portfolio Advisors. Send your queries to yourmoney@bsmail.in