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How to build your financial portfolio in 2021

With equity markets on a high and interest rates at nearly their lowest, six financial planners show the way on how to build your financial portfolio for 2021

January 05, 2021 / 09:30 AM IST

We were unprepared. Most of us. Nobody thought at the start of last year that our finances would go through such a turmoil. Just as we were settling into the New Year, Coronavirus struck. A global pandemic was declared, and countries including India went into a lockdown. Incomes fell and, worse, many jobs were lost. Those of us who had contingency plans or an emergency corpus, survived. Again, those with health insurance got a bit of comfort that hospital bills would be taken care of. Meanwhile, the S&P BSE Sensex fell sharply by 38 percent between January and March 2020 as the pandemic took roots. But, from its lowest point to the end of the year, the Sensex rose 84 percent. Our moneybox was tossed and turned. Can we stay better prepared in 2021?

Moneycontrol spoke to six financial planners on how to manage your portfolio in 2021. All the experts drew from the lessons learnt from the year 2020. Read on to know what the experts had to say.

Pankaj Mathpal, Founder, Optima Money Managers

“Investors must review their portfolios, not only because it’s the beginning of the year 2021, but also because equity has delivered unexpectedly high returns in last nine months. Since the fall in March 2020, the S&P BSE Sensex has returned 84 percent by end-December 2020. As a result, asset allocation among equity and other assets might not be the same as their original plans. Investors should rebalance their portfolio based on their risk appetite and the objective of investment,” says Pankaj.


Pankaj’s investment mantra for 2021

-Equity has outperformed in recent times. But do not go overboard with it

-Asset allocation is the key to making your financial planning strategy successful

-Stick to your financial plan

-Build a contingency fund. That is more important now than ever

-Prepay additional loan amount now if you had availed of the EMI moratorium

-Clear credit card dues as soon as possible

Mrin Agarwal, Founder, Finsafe India

“We are starting 2021 on a high. Equity markets – domestic and international – are at all-time highs, while interest rates have bottomed out. In this scenario, it is easy to get swayed by tips and hearsay. Create a financial plan, if not done already and follow asset allocation at all times. Invest as per your risk-taking ability and choose products which are simple to understand, are regulated and transparent about their working and costs. If you are not sure about where to invest, consider solution-oriented funds that can tie-in with financial goals,” says Mrin.

Mrin’s investment mantra for 2021

-Regularly review financial plans

-Do not chase trends. Read to become an informed investor

-Take formal financial advice

-Don't consider products only based on past returns.

-Understand every product’s risk quotient.

Amol Joshi, founder of Plan Rupee Investment Managers

“Neither setbacks nor opportunities come announced. Just benefit from opportunities by staying invested. Do not lose sight of your long-term financial goals during short periods of volatility. Excess risk taking as well as risk aversion, both have downsides. Instead, your asset allocation should guide you throughout your investment journey. Top-up your investments every year. The portfolio that you build over time across market cycles will ultimately lead to meeting expenses towards your life goals,” says Amol.

Amol’s investment mantra for 2021

-Do not chase past returns, but review your portfolio regularly

-Make best efforts to continue SIPs

-Maintain asset allocation

-Use equity for long-term goals

-Keep the number of funds to the minimum

-Have a plan ready. Work towards it over the years and modify as things change.

Joydeep Sen, corporate trainer (debt markets)

“The basics of investing remain same in 2021. Having said that, the typical aspect of the current times is that prices of assets such as equity or gold are going up due to high global liquidity. And liquidity will remain high, as central banks all over the world are planning to pump in more. In 2021, investors should avoid recency bias – for example investing in bitcoins just because the prices have been rallying in recent past – and invest in proven asset classes such as equity, debt, gold and real estate,” says Joydeep.

Joydeep’s investment mantra for 2021

-Ask yourself why you have invested in an asset class or a product

-Go less by past returns; instead look at future prospects

-Rebalance your asset allocation periodically

-Do not take undue risks in bond portfolio to earn high yield

-Equity market correction can happen, just go through the cycle

-Allocate 10 percent of your portfolio to gold

Deepak Chhabria, CEO and director, Axiom Financial Services

“The year 2020 has shown the importance of holding on to a financial asset. Investors who relied on fixed assets such as real-estate for rental incomes faced issues, as tenants vacated houses. First, monitor your investment portfolio. Second, re-balance if required. We re-balance only when equity markets rally. But we ignore re-balancing when equity allocation falls during sharp market corrections. Also, if your investment is aligned to a certain goal, and the goal is close, take that money off the table. Third, if you want to re-start your investments, don’t wait for equity markets to dip. Through a systematic investment plan, you can benefit from rupee cost averaging, even if markets correct.

Deepak’s investment mantra for 2021

-Don’t look to time equity markets

-Complete (at least) one market cycle even if stock markets correct

-Don’t get carried away by new fund offers

-Stick to your asset allocation; re-balance / increase equity allocation when markets decline and vice-versa

-Don’t overly depend on physical assets such as real-estate

Kalpesh Ashar, certified financial planner, Full Circle Financial Planners and Advisors

The year gone by gave a strong reminder on the importance of a financial plan. Those who had health insurance policies and contingency funds were relatively better-off. A financial plan in place last year in 2020 would have ensured that our investments continued, despite market turbulences. In 2021, opt for simple products. In equity, diversify across index, large-cap, flexicap and  mid-cap funds, to get a wide exposure. On the debt side, you need to be more cautious. Don’t look to chase returns in debt investments; go for products such as short-duration funds, which hold the highest quality of debt investments. You can make around 10 percent allocation to gold to hedge your investments,” says Kalpesh.

Kalpesh’s investment mantra for 2021

-Take adequate insurance: health and life plans.

-Prepare a contingency fund, then do goal-based investing

-Don’t panic, stick to your financial plan and investment goals

-Don’t get carried away by high returns; equity markets cannot be predicted
Moneycontrol PF Team
first published: Jan 5, 2021 09:30 am
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