A to-do list to protect and grow your money in uncertain times like these

They say the market is a reflection of the times we live in. It’s quite unsurprising then, that since March 2020 the market has been turbulent, volatile and unpredictable, mirroring the state of the world ever since the Covid-19 pandemic began.

After the record rally in March and April 2020, equity indices fell significantly and have steadily been in recovery mode until now - April 2021 - when the market has seen yet another downturn.

What does the rest of 2021 look like? It is as difficult for say for the market as it is for life in Covid times. Investors should be prepared for uncertainty and volatility and steer clear of the knee-jerk response that most people tend to show – of being swayed by recent performance without looking at the big picture.

Instead, one must examine, analyse and proceed in the context of one’s individual needs. The key to this is creating a personal investment code (PIC) – a bespoke foundational wealth management guide that will let you reach your goals and keep you on track in the long term, despite the periodic obstacles that you and the market might face in the present.

What is a Personal Investment Code?
It is a long-term financial roadmap that outlines your investment goals, strategy and framework while balancing your objectives, risks and requirements to give you the outcome you need.

With this as your guiding light, you and your financial adviser can either continue on your current investment course or pivot purposefully in response to market fluctuations. It is highly recommended that you sit down with your adviser to create a comprehensive PIC for yourself. In case you want to approach it on your own, here is how you can get started.

• Define your objectives

What is the end goal that your investments are building up to? Think of the short and long term, and account for both. For instance, if you are investing for a comfortable retirement, but also need enough liquidity for an imminent vehicle purchase, list both those goals down in as much detail as you can.

Identifying goals is crucial for building your PIC, and this exercise will help you prioritise and invest in the direction that you want to be headed.

• Map out a timeline

How long does your portfolio have to meet your objectives? The more time you have the better, of course, but look back at the objectives that you have set for yourself and note down the timelines corresponding to each. For instance, if you have a long way to go for your children’s wedding goals, but want to make a down payment on a house in three years, add both timelines to your PIC and make your portfolio work towards them in an integrated manner.

• Identify your relationship with risk

Are you comfortable with high risks if it means high rewards? Or do you prefer a slow and steady approach to growth? Asking yourself these questions is important for your PIC, the answers define your appetite for what you can and should do and draw boundaries for your decisions. Your portfolio should be diversified to reflect your position on the risk spectrum.

For instance, if you are moderately open to risk, you could consider a combination of investments that will keep you stable in the short term (like RDs) and those that could potentially fetch returns in the long term (like equity funds). Conversely, if you are risk-averse, stability is key and you can get that by focusing on instruments like Government Bonds.

• Set your expectations

In line with the points you’ve identified, define what kind of expectations you have for your returns. Adding this to your PIC can help you in two ways:

a) They are a good barometer for the first 3 requirements. The expectations you set will give you an indication of whether your goals, timelines, or risk appetite needs to be modified.

b) They will minimise uncertainty, so irrespective of what the market is doing on any given day you can stay steady or course-correct to reach your current target.

Let’s look at an example, to get you started.

• Mr Gupta is 55 years old and is looking to build his PIC.
• His goal: To augment his retirement corpus.
• His risk appetite: Low. Would like to avoid swings in returns.
• His timeline - 5 years
• His expectations - 8-10%

Recommendations for Mr Gupta
Half the assets should be allocated towards largecap funds, with the rest divided equally between smallcap and midcap funds.

Now while this is just an example that needs to be detailed, this is meant only to get you thinking to help you craft a PIC that aligns with your needs and wants.

How can this help navigate turbulence
With your PIC in place, analyse your portfolio to see if they both are in sync. Check if your assets are allocated in the right way while accounting for your short-term and long-term requirements and keeping potential market volatility in mind.

If they are, proceed along the same path and instead of analyzing market movements in isolation, do it in the context of your PIC. Keep monitoring your portfolio to evaluate if your current method is working for you, and be open to change with an eye on the bigger picture.

If you realise that your portfolio needs readjustment, talk to your financial advisor to modify and optimize it. We recommend a portfolio review regularly to ensure that your investments are correctly indexed and to make the changes needed to adhere to your PIC.

Lastly, schedule a more in-depth review of your PIC and portfolio every five years to assess what goals have been ticked off or added on. Accordingly, realign your investment strategy to reflect your updated position.

Conclusion
By applying the PIC-led approach to your investment decisions, you can bring a sense of structure to your financial decisions and get several steps closer to the future that you want irrespective of the uncertainty that 2021 might bring.