Explore The Best Ways For Investors To Approach Investing In Election Year
Wednesday, Feb 21, 2024
The Election Plot.
You know, the current Indian government under the leadership of Narendra Modi, were confident of leading the nation across the $5 trillion milestone this year. But the global circumstances haven’t been in favor of economic growth. The pandemic derailed the economic growth trajectory of the worldwide economy but thanks to the coordinated efforts of people from nations everywhere, we have overcome and the Indian economy, along with all the global economies have bounced back.
There have been scares of recession in the past couple of years. Especially, since the pandemic was controlled and post people getting back to work. But surprisingly, the recessions have only been theoretical and on-paper. Significant impacts have not been seen on the ground in the real world. In fact, the ongoing war caused a much drastic and violent volatility in the indices everywhere.
The commonality among shifts in market trends is that the market is aware. Just like how your pet dog anticipates and reacts to the diwali firecrackers, the markets react to any impending bombing of a city. What else? If you’re traveling and are looking for a dog sitter, how your dog adapts while you’re away depends on the ability of the new sitter. If the owner is familiar with petting your dog, then your dog knows he’s already in safe hands!
Every election is like selecting a new sitter for the dog. For the sake of analogy, our dog is our beloved economy. If the elections go as planned, there might not be any major spikes or dips in the economy. But imagine a candidate with a contrarian mindset rising to power; the markets would react strongly as it’s very unexpected. Depending on the beliefs of the new sitter in power, he might either teach our pet new tricks and make him more fun, or beat the dog up and end up traumatizing him.
Mobilizing Investments in Election Times.
There aren’t any magical procedures that you can follow to ensure that your investment cards stay unscathed at times of extreme events, but there are proven ways that surely let you maintain your composure while facing such circumstances.
Let’s look at things you can be proactive about:
1. Believing in the Long-Run.
When you look at investments as a means of elevating the human race, these short term fluctuations are merely temporal variations that are directionless and carry no weight to them. In the long run, consistency and having skin in the game is what matters. Panic selling and ruminating over unrealized losses only causes you unnecessary stress. Play the long-game.
2. Continued Systematic Investing.
During the election year, the markets are skittish. Typically they don’t move much and are in reaction mode. The resistances are strong and the market just has no clue on where it’s headed due to uncertainty in terms of favorable monetary and fiscal policies. By continuing to invest, you will be able to get better deals all year long. This would work in your favor as typically, post elections, the markets would outperform. Systematic capital injections into an uncertain market might result in your portfolio making good returns upon rallying.
3. Diversify.
This can’t be emphasized enough. Diversification is a must, especially when you’re optimizing your investment strategy for the election year. Since lots of economic perspectives are on the table, considering different political parties and unique ideologies of various candidates, clear information relevant to market sectors remain in the dark for most of the year. You don’t want your investment in one of the asset classes dragging your entire portfolio down. Diversifying distributes risk across various asset classes and sectors
You don’t want your investment in one of the asset classes dragging your entire portfolio down. Diversifying distributes risk across various asset classes and sectors thereby alleviating any critical threat due to unhealthy dependency on a particular form of investment.
4. Seek Expert Advice!
If you’re worried your portfolio isn’t properly diversified or that you have the wrong allocation for your needs, time frame and risk tolerance, it may be helpful to consult with a financial advisor. They can review your portfolio and provide personalized advice based on your current finances and goals and safeguard your portfolio.
If you think following all this is too much, believe us, it is!
We know this from first-hand experience. It takes an extreme amount of dedicated effort to actually navigate the market climate, that too amidst random assertive information storms in the name of ‘Propaganda’.
If witnessing volatility makes you uncomfortable and are worried about your allocation aspects, risk level issues or having the right strategy for the ongoing circumstance, then you can connect to expert advisors at Greenportfolio.
Greenportfolio PMS is specifically designed to let you off the hook for research and portfolio calibration, and put our experts at work to manage and implement your custom strategy for you.
When Volatility Persists.
Everytime you check how your portfolio is doing, you might witness the market rapidly moving. Obviously, it’s nearly impossible to assess why it’s behaving the way it is, but the temptation to churn your portfolio is real and a tough one to ignore.
Though it’s tempting, you need to understand that increased churn only leads to bad outcomes. You might be wondering, “How exactly?” as of now, but you’re forgetting all the tax liabilities and more importantly the transactional charges increased churn leads to. It’s very easy to lose control and fall in to the bottomless cycles of loss-recovery circuits.
Instead, consider that volatility is actually great because you can follow the short term reactions; not to time the market, but to make strategic capital injections to acquire more assets at discounted prices when sellers take control and push specific stocks into the bottom circuit.
Being aware of the volatility, why it occurs and closely following the political theater and the reactions of financial products, you can make rational assessments and investment choices that are beneficial in the long run.
Try out hedging strategies as well as investing in safe-haven assets like gold and government bonds to have access to the buffer that you would desperately need, to stay composed in case of a real market downturn.
Elections are an exciting period. Not only in terms of financial opportunities, but because it defines the future direction of the country itself. Under the leadership of the right leader and the right party, a country like India can rise the ranks quickly to become an unstoppable economic superpower. With such high stakes involved, it’s not shocking that the investors worldwide carefully follow the Indian political theatrics to ensure that the nation is on track and hasn't lost trajectory.
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