How to allocate funds across asset classes as markets crash

Praveen Vikkath

Many investors have been feeling the pressure since the equity market experienced volatility due to escalating geopolitical tensions, leading them to consider withdrawing money from various investment avenues connected to equities.

Making the situation worse, commonly considered safe havens such as gold and silver also faced setbacks as the dollar strengthened due to resilient U.S. economic data, rising interest rate expectations, geopolitical tensions, and strong safe-haven demand.

At this juncture, Vaibhav Porwal, co-founder of Dezerv, a wealth management company with Rs 16,000 crore of assets under management, advises investors to keep investing, as he believes corrections are opportunities, not risks. In an interview with Moneycontrol, he put forward suggestions on allocating funds to various asset classes so that an investor could navigate through the mayhem and reach a safe shore with ample profit.

Equities

According to Vaibhav Porwal, shares are currently available at a fair price, as corrections over the past month have erased excess valuations, and this kind of situation, where good times have come at a favourable price, is rare.

Some high-quality stocks in sectors such as banking and financials, new-age businesses, and IT are currently trading at a 30–50 per cent discount.

Around 40 per cent of equity investment should be allocated to small caps and mid caps, and 20 per cent should go global.

Gold and Silver

Vaibhav advises investors to allocate around 10 per cent to gold and silver as long-term investments for stability.

Overall Allocation

Vaibhav Porwal suggests a 70 percent allocation to equity, 20 percent to fixed income, and 10 percent to precious metals, even though the outlook appears discouraging.

There may be further corrections ahead if the situation worsens. However, attractive valuations would enable investors to procure more units at cheaper prices.

Undertaking the reallocation of investment in equities as per company results is also significant.