Does Your Portfolio Need a Financial Shift?

“The most important quality for an investor is temperament, not intellect.” – Warren Buffet Most stock-market maestri have one thing in common – patience. However much you may be enticed to make changes in your investment portfolio when the market is low, those who weather the storm reap the long-term benefits. Giving your investment portfolio a financial tweak isn’t always in your best interest—the market is as prone to a quick rise as it is to a quick dip.

Things To Consider Prior To Making A Financial Shift

1. Purpose of your portfolio

What is the purpose of your investment portfolio? You are here to achieve a few goals within a set tenure. The purpose of your portfolio should dictate a financial shift, not the market fluctuation.

2. Status of macro-market phase

You may consider a financial shift in your portfolio if there is a change in the macro-market phase, such as a transition from a bull to bear market or a bear to a sideways market. Move slowly and see if the phase is exhausted and the fundamentals have shifted.

3. Possibility of a market rebound

The market generally rebounds more swiftly and with more vigour than when it dipped. Suppose you have modified your investment portfolio when the market dips, hoping to avoid minor losses. Now, when the market rebounds sharply, you might miss out on profits that you might have made had you not opted for a financial shift.

4. Goal change is on the cards

You are also strategising to handle market volatility when setting up your investment goal. Hence, be sure if it’s necessary to go for a financial shift when the market fluctuates.

5. Role of fear and anxiety

Is the shift a part of your overall strategy? Then, you are good to go. However, if fear and anxiety of a bear run triggers a shift, you want to put a stop.

6. What is your stance?

Is your decision a reaction to a sudden dip in stock prices? If so, you should review the fundamentals instead, or conduct a technical analysis of your investment, analyse the stocks, and take a proactive decision rather than make a rash move.

7. Seek an expert’s help

It is always better to consult your financial advisor before deciding if your portfolio needs a financial shift.

8. What’s your risk appetite?

You need to plan your financial portfolio according to your risk appetite. However, investments have a risk-return tradeoff. So, lower-risk products typically would offer lower returns, and for a higher return, you would have to take higher risks.

However, to suit your risk profile and still achieve your financial goals, you can systematically increase your risk appetite by starting with products with more balance and then investing in equity or other high-risk investments through the SIP route. Remember that the most important aspect of achieving your financial goals is to stick to your ideal asset allocation based on your risk profile and follow your investment objectives in a disciplined manner. Also, do not forget to review your portfolio periodically to track performance!

Final Takeaway

It is best not to disrupt your investment portfolio during market fluctuations. Nevertheless, a shift in your investment purpose, goals, timeframe, risk appetite, etc., may prompt you to decide if your portfolio needs a financial shift.