With stock market volatility and gold and silver prices fluctuating amid geopolitical tensions, global interest rate trajectories and ongoing uncertainties over economic growth, retail investors are grappling with a classic question: how to invest?
The current macro environment amid heightened geopolitical risks has raised questions about where to park your money and what strategy to adopt for gold, equities or bonds.
Many new retail investors try to figure out what works best for them. However, experts point out that a good portfolio is a mix of a variety of asset classes, as they complement each other.
One's investment strategy should be in line with their risk appetite and financial goals. However, it is important to adjust the portfolio as per the current market conditions.
So, how should an investor invest in the current times?
investment strategy for equity
Equity is considered the best asset class for the long term. However, it is important to understand that they are also the most volatile.
Inexperienced retail investors may panic during prolonged market correction periods and exit at the wrong time, whereas they should ideally continue investing in equities through Systematic Investment Plans (SIPs).
“Volatility in equities and gold prices at record levels are not signs of reaction, they are signs of rebalancing. Equities remain the primary compounding engine, but the emphasis has been on quality and orderly deployment,” said Anuj Badjate, managing director, Badjate Stock & Shares Pvt Ltd.
Gaurav Didwania, partner and fund manager, Qode Advisors, said that for most Indian retail investors with medium to long term horizons, equity is and should remain the primary driver of wealth creation.
“Historically, Indian equities have delivered strong compound returns over multi-year periods, outperforming many other asset classes when measured over 5, 10 and 15-year periods, provided investors can tolerate volatility along the way,” Didwania said.
This does not mean that equity investing is comfortable.
During volatile phases like the current one, the indices can swing by 10 to 20% within a year. Shortcomings feel acute and the spotlight increases anxiety.
“But the practical reality is simple. Timing markets rarely works. Disciplined, diversified exposure does work. Instead of reducing equity exposure in reaction to short-term moves, investors should build an equity foundation that reflects the breadth and depth of growth opportunities in India and global markets,” Didwania said.
investment strategy for gold
Gold should definitely be a part of one's portfolio, as it is a hedge against inflation and protects one's portfolio in times of economic and political crises and stock market declines.
However, experts caution that gold should not be considered a high return asset.
Naren Agarwal, CEO, Wealth1, said, “Geopolitical flashpoints have increased safe-haven flows. Central banks globally have added over 1,000 tonnes of gold in each of the last two years, one of the highest levels in decades. In such a backdrop, a 10-15% allocation to gold and 5-10% to silver within the commodity sleeve is a cushion against currency volatility and geopolitical shocks. “Can act as an effective defense.”
investment strategy for bonds
Unlike equities, bonds provide relatively stable returns and act as a cushion during market downturns.
However, bond prices can also fluctuate based on interest rate fluctuations. Longer tenure bonds are more sensitive to rate changes, which is why experts advise investors to prefer short to medium tenure debt funds, target maturity funds or high quality corporate bonds.
According to Budgett, retail portfolios should prioritize structure over sentiment. For a 5-7 year investor, a disciplined allocation of 60% equities, 25% high quality bonds and 15% gold remains prudent.
“Bonds today offer meaningful yields and portfolio stability, a combination absent for years. Gold should remain a hedge, not a substitute for growth,” Budgett said.
“For retail investors who can wait out short-term turbulence and are committed to a disciplined, diversified plan, equities remain the most powerful engine of long-term wealth creation in India. Gold adds value when governance protection or inflation hedging is sought. Bonds may meet specific liquidity or income needs, but for long-term investors they should not displace the equity growth engine,” Didwania said.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the individual analysts or broking firms and not of Mint. We recommend investors to consult certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.