Experts discuss ways to protect portfolio gains in a falling market

One of the easiest ways to protect your profits on the upside in a stock market is to take profits off the table. But when it comes to long-term financial instruments like mutual funds, this strategy may not always work. To ensure your portfolio is well positioned for growth and you don’t make mistakes that could hamper your overall performance, it’s important to make the right investment decisions.

For investors spooked by global market volatility and geopolitical tensions, held an exclusive session on Ways to Protect Your Portfolio Gains in a Down Market.

“Ideally, a good portfolio is one that maps to your long-term financial goals and is well diversified across different asset classes, including stocks, and different styles and segments within stocks. Gold and fixed income in a portfolio help investors get a full palette of products that can help you achieve your long-term financial goals.” Sorbh Gupta, Fund Manager – Equities, Quantum AMC said during the session.

Volatility is a given when it comes to stock markets. Portfolio planning depends on multiple factors, such as an investor’s appetite for risk and financial goals.
“On a 20-year basis, Nifty and Sensex have delivered close to 20 times more types of returns despite volatility. Asset allocation makes the investment journey palatable by combining equities with other asset classes like gold and long-term debt.” according to Arun Kumar, head of research at Funds India, on the best strategies to protect portfolio gains.

On the factors investors should consider when choosing funds, Gupta said:
“There should always be a concept of a branch of funds for long-term investments. Different styles of funds work well in different time frames. After 2020, value stocks or value portfolios perform better than growth funds due to factors like cyclical recovery, interest rate revision, etc.

A well-designed fund branch can help investors overcome volatility and have that diversification benefit.

Some of the factors to consider when choosing a fund:

  1. Periodic review of funds: The portfolio should ideally have 5-6 funds
  2. Consistency in investment style: Continuity in the Fund Management Team
  3. The portfolio must have low turnover: The fund manager must follow the same investment strategy as the AMC
  4. Low expense ratio: Expense ratio or amount that an asset management company charges investors for managing an investment portfolio. A higher expense ratio will impact investors’ performance in the long run.

Our experts also deliberated on the best asset classes for diversification and whether investors should look to global markets for portfolio diversification. To see the full session click here.

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