Udayan Mukherjee, Consulting Editor of CNBC TV18, talks about the importance of maintaining at least 15-20% cash in you portfolio.
During an election year, it is important to ensure that one maintains a decent amount of cash in his/her portfolio. In times of volatility, around 15 percent to 20 percent of cash can be utilised to capitalise on the wild swings in the market.
If you are 100 percent invested, and even if the market falls 10 percent or 20 percent, you will not be able to participate in that kind of a panic phase.
During such a phase, high-beta or low-quality stocks do not perform well. Historically, it is the blue chip, high-quality, good balance sheet stocks and companies with high quality management that will give healthy returns.
Investors who are well-versed with market strategies can also use futures & options around major events to save themselves from a big blow.
Watch the full episode of Stock Market Classroom for Udayan Mukherjee's perspective on how to make money in stock market during high volatility phases, such as general elections.Click here for more on Stock Market Classroom articles.