For the election year….

As we are running up to the elections, the stock markets are going from bad to worse. Hopefully it will get better & find its stability till a new government gets elected.

Going by past experiences, this has been a trend for the last four terms. However, after a low swing markets always take an upwards plunge soon after the results are announced. In fact, what’s in store this time could be gauged when the markets revived by a few notches immediately after state poll results were declared late last December. Whenever markets were flat in the previous year it had given returns of about 18-20% in the following year.

Hence, amidst all this instability, financial planners and analysts thinks that this is one of the best year to make risky financial investments like equities or mutual funds.

But in both investments, large caps are more recommended as they reflect the broader market and sentiment. As per market experts, volatility should be use as a tool for picking great companies across the market cap spectrum to build a robust portfolio and disregarding down market, large caps are almost never cheap. Therefore if someone is building a new portfolio when large caps are cheap, that portfolio will give great returns in longer term.

Best investment options in 2019

Stock Market: The banking sector will be on a revival mode after the elections and it will be one of the best choices for investments. In the recent past, most of the banking companies were on the lower side. However, some of them are already starting to show profits. So, betting on them will be a good choice on a long-term basis. Three or four banking companies are about to start their own operations. Few like Indiabulls or Edelweiss have already started and Edelweiss has issued non-convertible debentures worth Rs 23 crores which were successfully floated in the market. A lot of companies in Pharma sector will also show good investment opportunities.

Mutual Funds: Like always, mutual funds is another good investment choice. There are many types of funds which are suitable as per your investment needs and also helps to diversify. From past few days mutual funds also facing some down side. India’s one of the biggest asset management companies DSP went through a rough patch in September and October last year. However it is starting to regain some of its value. Starting investing with them would get the benefit of indexing right at this moment.

Non-convertible debentures: As compared to fixed assets like fixed deposits or recurring deposits, where interest is of 5-7%, the non-convertible debentures usually give an interest of minimum 10 to 11% Moreover, they are again tradable at the stock markets.

The old adage always holds true – Never keep all eggs in the same basket. It is always advisable to keep a diversified portfolio. A combination of debt, equity, gold and international equities is always recommended. But for the election year, the analysts suggest the portfolio should be skewed towards equities. Election years give you the best opportunities to play your risky bets.

We would recommend keeping at least 60 % of the portfolio skewed towards large cap and remaining should be a mix of mid cap and small cap stocks. Also, investors should keep their money diversified among the different business sectors. Also, individual stock allocation should not exceed 10% of the portfolio.