DAILY VOICE | Long-term investors should sell underperformers, switch to market leaders: Sahil Kapoor of Edelweiss Professional

A) Financial independence is a goal, which is absolutely worth pursuing. Over the years, India has witnessed an increased awareness about various ways to become financially independent, apart from traditional ideas of savings.

The current pandemic has laid bare, the critical role of a well-diversified, low volatility portfolio along with a contingency fund that plays a crucial role in our material well-being and peace of mind.

The first step towards financial independence is self-inquiry. One must introspect on lifetime milestones, family needs, and emergency covers.

Once the risks and costs associated with these events are understood, one must plan their investing journey accordingly.

A slow and steady approach to financial independence helps create an investment portfolio replete with a mix of equity, debt, and a small portion of alternates.

In addition to this, one must look to cover emergency requirements with health insurance, life term cover, and a cash equivalent contingency fund.

Q) Some new NFOs have been launched recently to tap US markets. Do you think that investing abroad is a must in one’s portfolio? What are the factors which one should watch before investing in overseas funds?

A) India has a very large number of opportunities and ideally it is a market that can address all the needs of an average Indian investor. But, to add an edge of diversification, one can choose to invest in overseas funds based on their investment horizon and risk appetite.

In addition to being careful regards instrument selection that matches your capabilities to understand nuances in foreign investment, keep an eye out for regulatory requirements, tax implications, and cash flows.

Q) Gold surpassed $2000/ounce just last week. Equity markets are also up by about 50% from the March lows, but will still beat Equity Asset Class hands down in 2020. Do you think investors should tweak their portfolio allocation strategy?

A) Gold has proven to be a valuable portfolio component over time. Because of the lumpy nature of returns and tough to time characteristic of this asset class, it requires a steady portion of portfolio allocation. After its recent stupendous performance, it is advisable to wait for Gold prices to correct.

Q) Someone who is already invested or long in the market since March, what would you advise – book profits or hold for more potential gains?

A) Long term investors should stay invested and practice a buy on dips strategy. At this juncture, investors may want to sell-off underperformers and switch to market leaders across industry segments.

Q) What is your target for the yellow metal for the year 2020, and how can investors leverage the share momentum which this asset class is seeing?

A) Gold appears to be in a favorable trend for the next two years. However, for 2020, a large part of the gains, have been realized. It may consolidate for a while at its life highs and may undergo a price and time correction. In short, further gains may take a while to come.

Q) Which are you re-rating themes in markets and why? Or sectors which could get rerated as economic normalizes?

A) Sectors and stocks in Pharma, healthcare may benefit from pandemic related shifts towards health. Once economic growth stabilizes, stocks in consumer discretionary sectors like auto, pipes, electronics, and personal care, may do well.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.