Sticking to the fundamentals of investing

Stock markets globally are going through a volatile phase eroding investor wealth significantly. This negative sentiment is likely to prevail considering rising Covid-19 cases and ongoing lockdowns.

The Indian market, too, has suffered from the pandemic’s domino effect, weakening customer sentiment and freefalling oil prices. The commodity market is bearish, while rising gold prices are pushing away investors. Real estate, too, has few takers.

Does this mean that one should completely shy away from the markets?

Not according to Indu Awasthi, VP, Investment Advisory of Quotient Digital Solutions. In fact, she advises being in the fray while strictly adhering to certain investing fundamentals.

This includes exercising control on emotions. “Capital protection is the key requirement now. Therefore, investment in the markets should be very strategic in nature. Since both equity and debt of all kinds are currently available at their lowest costs, the attraction towards is similar as in the sale season,” she cautioned.

With the ongoing lockdowns, investors are keen maximise their gains with better asset allocation. This is an ideal opportunity for fintech firms to prove their worth.

“The current scenario has proven that technology surpasses human involvement to a large extent in certain domains. Online financial services platforms are still allowing investors to stay in the market while asset management companies and ancillary bodies associated with them are suffering from the lockdown,” Awasthi pointed out.

AI-driven digital platforms of banks or fintech firms not only allow easy transactions but also provide data-backed advice about products to buy and sell on a daily basis. Since it is important to have a purpose behind any investment, their algorithms select stocks and schemes, and even personalise it for investors to invest wisely in contemporary times.

This lockdown presents investors an opportunity to relook at their portfolio. There are several wealth management tech tools they can leverage to determine if they are under-allocated to equities based on their risk profile. These include ArthaYantra, ValueResearchonline, MoneyControl and Capital Quotient, which is operated by Quotient Digital Solutions.

“These platforms align investment portfolios to the time horizon of one’s financial goals. By doing that one can evaluate if their allocation to equity is under or over allocated,” Awasthi said.

She explained this with two instances. If an aggressive investor is planning for a short-term goal within six months, it’s not prudent to allocate more to equities. But if a conservative investor is planning for retirement in 20 years, then given this longer-term horizon they can over-allocate to equities.

Fintech platforms can, thus, help investors evaluate their financial goals and allocate assets for each goal. They can they arrive at whether they are over or under allocated to equities.