Stock market at record levels: Issues to raise while reviewing your portfolio

The stock market has been on a roll during recent days with the Sensex breaching the 38000 mark a week ago before slipping slightly below the mark. There are talks the market could be headed higher in coming months though there are risks at these levels, including possible impact of global worries such as the Turkish crisis.

If you are an investor, you would be worried about what to do at this point with your portfolio. And if you have a financial advisor, what should you discuss about your portfolio while reviewing it.

“When the basics are right, i.e., your investment portfolio is appropriately designed to suit your goals, financial set-up and risk behavior, you won’t have to worry over market movements, RBI interest rate changes and other short-term asset price trends. So that’s what everyone should make sure of,” says Amar Pandit, Founder & Chief Happyness Officer, at HappynessFactory.in.

Pandit says the two main questions to ask your advisor are whether the portfolio is haphazard or are they linked to my goals and secondly am I taking more risk or less risk than is ideal for me?

“The point to know if there gaps and opportunities. A good advisor would have already taken cognizance of your behavior to investment risk while designing your portfolio. If you have more capacity to take risks than is reflected in your portfolio, then your advisor can help you bridge the gap by adding the appropriate asset classes and within each asset class add the relevant categories that can help you reach your goals better. Alternately, if you have taken on more risk than is ideal for your risk capacity or for your personal risk preference then a portfolio rebalancing may be required to cut down on risk,” he said.

Pandit points out that in the current scenario, though the broad markets have been hitting all-time highs, the midcap segment has performed poorly. “Midcaps are generally more risky than large caps, which means their returns can fluctuate more widely than returns from large caps would. If an investor who doesn’t have the capacity or willingness to take higher risks has too much of his portfolio in midcaps then he will be highly disappointed,” he said.

Anil Rego, Founder and CEO, Right Horizons advises that one should discuss the following questions with the advisor in the backdrop of a buoyant market.

--The Sensex and the Nifty have made new highs. Should I invest more to take advantage of the momentum?

--As interest rates are going up, bank FD rates will also rise and offer better deal for deposit holders. Is it a good time to bet big on bank FDs?

--While stocks are doing well, gold is not performing. Investing legends say be greedy when others are fearful. So, is it the perfect time to increase exposure to gold?

--There has been a steep correction in midcaps and small caps which has affected my portfolio. Should I do cost averaging, or wait for some more time?

S Sridharan, Business Head, Financial Planning, Wealth ladder Investments, says investors whose portfolio has been showing negative returns despite the bull run should analyse the reasons. “If one is losing money one should ask the financial advisor to find the reasons. “Out of the BSE Sensex 30 stocks, the last one year returns were negative in the 40% of the sensex stocks, the rest 60% only moving the Sensex to the peak. However, there has been recover since end of July with positive returns of 10%. However, despite this mid cap and small cap have delivered negative return. If the investor portfolio is more towards mid and smallcap the overall portfolio returns would be negative,” he pointed out.