Experts believe that the markets are an image of the times we live in. Well, they are correct. Thus, it’s no surprise that the markets have been quite unpredictable and volatile since March 2020 that successfully mirrors the image of the world since the COVID-19 pandemic. It’s interesting to note that the equity markets fell significantly in March and April 2020 only to steadily rise again until now. But this was rather short-lived. The markets have again faced a downturn since April 2021. So, what should an investor do to safeguard their different types of investments amidst this volatile and unpredictable markets? This article aims to serve as a to-do list to protect and grow your wealth in uncertain times like this. Read on to know more.
Can one speculate the movement of equity markets for the rest of the year? Well, just like the COVID-19 situation, it is difficult to predict the markets. Experts advise that during times like these investors must be fully prepared both financially and mentally of the uncertainty and volatility in the equity markets. They must also try to stay clear of the knee jerk response and avoid taking hasty decisions like several investors without taking into account the bigger picture. Rather, an investor must focus on their personal needs. You can easily achieve this by creating a personal investment code (PIC).
What is PIC?
PIC is a long-term financial blueprint that sketches an individual’s strategy, financial goals, and framework while balancing their needs, objectives, and risk to offer them the outcome they desire. If you do not wish to use the services of a financial advisor, you can also do it on your own. Here’s how you can do it.
- Define your financial goals
Primarily you need to understand the objective behind your investments. Think of all – short-term, mid-term, and long-term and separately account for these goals. Being clear about your financial goals will help you prioritise your goals and invest in the right direction.
- Determine your investment horizon
Investment horizon is nothing but the time period you have to achieve a specific investment goal. Different goals will have different investment horizon. For instance, if your retirement is at least 20 years away, it would be considered under long-term goals. Whereas, paying for child’s school fees maybe few years or even few months away. This would come under short-term goals.
- Analyse your risk appetite
It’s very important to understand your risk profile. A higher level of risk is usually rewarded with a higher potential of significant returns. However, you must not invest aggressively beyond your risk profile. For instance, if you are having sleepless nights at the slightest hints of market turbulence and volatility, then you are probably investing way beyond your risk appetite. You might consider moving to safer investment options such as debt funds.
- Set your expectations
Basis your financial goals, investment horizon, and risk profile, outline the expected returns on your investments. Expected returns will offer dual benefits. First, it will help you understand whether you need to modify your investment horizon and/or risk profile. It will also help to diminish uncertainty with respect to your investments.
Applying a PIC approach to your investments will help you to bring a sense of structure to your decisions. Happy investing!