Investors Diary: How To Invest In 2019

We are almost 10 days into the New Year and there is one question which I am hearing quite often.

How to invest in 2019?

The year 2018 gave flat returns and even as we enter 2019, I can see volatility is still rampant and there is an abundance of anxiety with upcoming elections, looming US economic slowdown and of course the ongoing US-China trade war. No one knows what 2019 will bring, and this is exactly the reason I am writing you an email today. Despite the uncertainty, there are few universal recommendations while investing during such volatile times.

Here are four expert investing moves for 2019 for all types of investors, whether it’s an HNI, seasoned, novice or risk-averse investor.

Investing using a staggered approach

A staggered approach helps you to ride through the heightened volatility by spreading your investment over several months.

Stock prices have a tendency to go up and down in the short term. This zigzag movement is even more during uncertain times.

A staggered approach can help you avoid the feeling of ‘’I should have waited a day or two so that I could have purchased at a much better price.

If your investment goes down after you buy and it is still a good business opportunity, then you can utilize your funds to buy more as you are getting the same opportunity at a discounted price.

To help you understand the benefits of a staggered investment approach, I would like to use an example of two investors who invested Rs. 1 lac each in XYZ company.

Investor A uses a staggered investment approach to invest in 5 equal tranches whereas Investor B uses a lump sum investment approach.

As you can see in the above table, Investor A invests Rs. 20,000 every month under his SIP due to which he is able to accumulate more when the prices fall. His portfolio value at the end of 5 months is Rs. 1,30,460 whereas Investor B portfolio value is Rs. 1,10,000. This shows that continuing SIPs has always rewarded investors once the market rebounds.

As you can see in the above table, Investor A invests Rs. 20,000 every month under his SIP due to which he is able to accumulate more when the prices fall. His portfolio value at the end of 5 months is Rs. 1,30,460 whereas Investor B portfolio value is Rs. 1,10,000. This shows that continuing SIPs has always rewarded investors once the market rebounds.

Invest with a long term view

When you invest with a long term view, you are essentially giving time to the company to perform and its earnings to grow which will eventually get reflected in the share price.

Equity is a long-term asset and should not be bought by short-term funds. This is because in uncertain times if the market falls and you are in need of funds, then you may be forced to exit even at the cost of booking a loss.

Invest stock and sector specific

Many investors are worried about which sectors will perform and which one will tank in the current year. The FMCG sector delivered 13.65% gains in 2018 and is likely to continue its uptrend. Apart from the FMCG sector, we are also bullish on infrastructure, automobile and financial services.

A word of caution though. Even among sectors, there are certain companies which may outperform or underperform. Hence it advisable to invest stock specifically.

Review your goals

It’s easy to set a goal, however, you need to review them to ensure you’re on track. Hence assess your goals, time horizon and risk tolerance before making financial decisions.

To conclude there is no winning formula in the stock market. However, patience combined with detailed research-based methodical investing will help your portfolio to outperform in any kind of uncertain markets.

Read more:  How Long-term investing helps create life-changing wealth – TOI.