Indian markets have been in a recovery mode, rising over 2.5 percent in August after a near 9 percent rise in July. However, going ahead investors globally can expect market volatility in the medium term given the heightened geopolitical tensions and the potential for downward earnings revisions, a report by Motilal Oswal Private Wealth (MOPW) said.
To beat the market volatility, Motilal Oswal Private Wealth Management has curated an investment proposition named ‘Alpha Strategist Advantage Portfolio’ (ASAP). According to the brokerage, a rule-based multi-asset strategy is better than traditional fixed income investments amid this backdrop.
“The ASAP is an all-weather strategy and a superior alternative to fixed income funds. The rationale behind ASAP is to have a rule-based exposure across asset classes to take away behavioural biases and generate steady consistent returns over the long term,” said Nitin Shanbhag, Head of Investment Products, Motilal Oswal Private Wealth.
The portfolio comprises of equal-weighted investment in different asset classes like -
Indian Equities (investing only in the passive index funds) (20 percent)
US Equities (investing only in S&P 500 index funds) (20 percent)
Gold (Gold fund) (20 percent)
Debt (Target Maturity Funds) (20 percent)
Cash (Arbitrage funds) (20 percent)
"The advantage of having an equal-weighted portfolio is having a rule-based strategy across asset classes. Equities are hedged against Gold Funds and Arbitrage funds that provide a cushion against any major fall. While on the upside, the fund enjoys higher returns from Indian and US equities," explained MOPW.
It informed that ASAP's portfolio from 1990 to 2022 has grown at a compounded average growth rate (CAGR) of 11.7 percent against 9.9 percent growth of Gold, 8.3 percent growth of Debt and 13.8 percent and 13 percent growth of Indian and US Equities, respectively.
"The standard deviation of the ASAP was observed to be at 8 percent against a standard deviation of 27.4 percent in Indian Equities, 15.1 percent in US Equities, 2.6 percent in Debt, 0.6 percent in Cash, and 14.8 percent in Gold," it pointed out.
It further highlighted that the ASAP on absolute terms for the period ended 31st July 2022, has given 3.1 percent returns against 1.7 percent returns of the Crisil Composite Index.
It is important to note that the ASAP portfolio is rebalanced annually at the end of the calendar year in such a way that all asset classes have an equal weightage at the beginning of the corresponding next year. Profits from the top performing asset classes are distributed in the non-performing asset class, stated the brokerage.
Given the external risks and their potential impact, investing in a staggered manner may help iron out market extremes, it advises. The report added that as global central banks unwind their easy monetary policy, markets worldwide are expected to witness high volatility.
Ashish Shanker, MD & CEO, Motilal Oswal Private Wealth said, "the Indian economy & markets are at an inflection point. A confluence of factors will lead to sustainable growth this decade from Indian equities. The number of ultra-high net worth individuals is expected to grow from 6,884 in 2020 to 11,198 by 2025."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.