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How to To Survive & Thrive in the Market Volatility in 2023?
Updated: Feb 8
2022 has been quite a year, whatever could go wrong has gone wrong – high inflation, extreme tightening by central bankers, war between Russia & Ukraine. It has been such a topsy-turvy year. While India may have done very well in relative terms for equity investors, (do Remember the US markets are down by 25%) 2022 has not been great with single digit returns.
So, what can we expect in 2023: The general consensus is the Indian markets have outperformed peers in 2022 and due to the Value proposition offered the other Markets will look like a better bet. Well Its generally never this simple. Instead of trying to predict where the markets are headed, I will like investors to understand the way forward in a volatile & Negative market. Do remember “Most experienced investors find opportunities to build wealth for the long-term during bear markets,”
Take a 3 Year View: Investors must look past the doom and the gloom and realize that the way India is poised to be keep growing today’s prices are going to look like a bargain in just a few years. If there is a correction take it as great time to be investing as valuations will come down to really attractive levels (4 months ago we were closer to 16000 levels now we are suddenly +18000. While the markets might be rocky in the first quarter and even in the entire course of 2023, Investors who take the 3-year view will be amply rewarded. This brings us to the subject of how do I invest? Volatility and Negative markets scare everyone. This is actually good; I find that I am at I most attentive when I am scared😊. Keep continuing investing in MFs through the SIP route. Keep adding to your stock portfolio periodically in deeper corrections. If you have done your research and identified a stock and bought it at Rs 100 than Rs 95 is not a bad place to reinvest. Do not get scared. Have a plan stick to it. If you find value, keep buying in intervals. Bottom fishing does not work in the real world.
Stay Invested: You can’t get the market’s long-term returns unless you remain invested, but that’s exactly what is toughest to do when stocks have fallen. Nevertheless, it’s vital to stay invested. You want to remain fully invested and maintain your regular investments because at some point this market will begin to rebound and that tends to happen when the headlines are still pretty ugly, “You want to be on the train, and not on the platform, when it pulls out of the station.”
Get New Ideas: Innovation is important. You have to constantly try and figure out if there is a better or more effective way to do something. Wiremesh is implementing a new strategy on the MF front. To handle new tax implications on LTCG we will stop reallocating our equity Funds when the markets turn expensive. In lieu of this we will change our entire existing SIP investments to either Liquid or Balanced advantage funds. This will have multiple benefits. In MF’s we have the FIFO method (First in First Out) this will prevent our oldest funds which in turn will also be the most profitable from being sold. This helps in enabling compounding growth and will decrease CAPITAL GAINS. Another benefit it provides is when the markets do turn expensive, we will limit new flows exposure to Equity (Liquid and balanced funds) These funds will be liquidated when the valuations cool off. We will also not need worry about exit charges as these funds will have exits between 3 to 30 days.
Diversify and think Value: Get eggs in different baskets. Think of other investments approaches. Commodities including Gold is a great hedge. We have been advocating keeping 10% of your investments in Gold. Gold was under tremendous pressure 6 months ago with the Interest rate hikes and the Dollar strength. This could actually reverse next year and we are already seeing clear signs of the same. The IT sector is facing strong negative tail winds which will carry forward in 2023. There is still a lot of pain left for the IT sector, but for that exact reason you will also be able to find value This is a great time to introduce some of these funds, if it’s not already there in your investment basket. Another value theme is commodities which saw great disruption some time ago, we have added TATA steel during the price fall in June / July this year, It will be interesting to see what 2023 has in store for commodities. Again, do not let short term volatility disrupt your value-based investments. Banking and consumption based themes will continue to be market leaders, I am not going to get in to stock specifics as most of our readers know our picks in these segments. Recently we have also introduced an alternative Debt based investment platform to our clients with returns ranging from 11% to 16%. We have put great emphasis to limit exposure to the alternative debt-based investment to @ 5% of your portfolio and use it more of a tool for your rolling investments. Eggs in different baskets combined with a disciplines approach will curb the effect of volatility in your portfolio
Bottom Line: Many market watchers are expecting 2023 to be a rough time, with plenty of volatility. The consensus is that there will be a market correction in the first quarter followed by a recovery. However I will not be one bit surprised if the markets rally in the first quarter 😊 (led by IT) and the correction sets in post that. The thing that looks certain is there will definitely be a correction as corporate earnings will drop off Globally including India. I would strongly suggest do not worry about when the event will happen but focus on your actions during the Event. If you haven’t already added to your portfolio in the recent correction than get a clear plan to remain invested and top of your investments when the next correction in on. The Markets corrected 40% post covid, they again corrected @15% around 4 months ago. Did you take advantage of these corrections.? If the answer is no than you need a PLAN pronto. Clear planning and having long term (+3 Years) investing strategies will help you sail through choppy waters. And even if 2023 ends up being another tough year for investors, it likely sets up a stronger rebound for the following year, meaning now is the Perfect Time To Invest!