This being the last week of the year here is wishing all investors, countrymen and our near and dear ones, Happy Holidays!

2023 was indeed a good year for investors with all major indices gaining significantly over the year. All asset classes performed well except for bonds on the back of spiraling interest rates that were seen as a pre-emptive measure by most central banks across the world in response to rapidly rising inflation as the post COVID world gained traction in economic activity. While emerging markets remained volatile during the year it was a few markets that led the rally. Continuing geopolitical tensions and the consequent uncertainty in commodity markets as supply chains came under pressure saw softer markets. However, India was standout with record inflow of foreign capital, both in FDI and FPI toward the later part of the year.

On the back of renewed optimism on the economic front, continued growth in corporate profits and reasonable valuation compared to historical averages on the narrower more visible indices such as the Nifty in India; it is time to pause and reflect on the potential for market behavior in the coming year.

Resolutions for next year:

I will not be greedy:

Investors will be best served to remember that index returns are calculated on a compounded basis over long periods of time. In a year where returns have come in ahead of long term averages it is time to reflect if the same can continue. The law of averages will start to exert its pull at some time, even if not, a cloud of risk is seen anywhere at this time. The news is uniformly good across all parameters. Bull markets generally ignore risks and overplay positives. It is good to remain diversified and stay cautious across asset classes.

I will not be fearful.

In case the market corrects sharply for any unknown reason that cannot be predicted at this time but appears to take off significant valuation from companies in a short time, it is good to remember that markets are volatile. Our long term allocations to equity markets are based on the premise that markets will remain volatile in the short term and not be fazed if such a bout of volatility does hit soon. There may not be extra capital to allot to equities if such a thing actually does happen but staying the course and continuing the allocation to equity is the need of the hour. Bond markets may look attractive comparatively but unless your asset allocation allows for it is futile to change your allocation in favour of bonds out of equities on a sharp correction as a fearful reaction.

I will asset allocate

At the start of the year, it is best that investors take stock of their asset allocation and move it in line with their goals, whatever they may be. Whether for retirement, whether to raise money in growth assets for your child’s education 7-8 years from now or a daughter’s wedding 10-12 years from now. Keep some allocation to fixed income funds for near term goals and a smaller allocation for immediate liquidity concerns. These are strategic allocations and should not looked upon as return comparisons at the end of the year,
I will enjoy my investing in the new year and hope, dear reader, you have a great year too!

Disclaimer: This newsletter is being curated by HXGON Partners LLP, a knowledge partner of Epsilon Money. This newsletter is not intended to be used as a recommendation and is generic in nature. Investors should follow the advice of a qualified investment advisor before making any investment decisions and should read all investment related documents and risk disclosures.
Epsilon Money Mart Pvt Ltd (Epsilon Money) having its registered office in Mumbai, Maharashtra India, is an AMFI registered Mutual Fund distributor and IRDAI registered Corporate Agent. Epsilon Money, along with its referral partners, affiliates etc., offers a suite of wealth management products and services to its customers in line with regulatory approvals. Epsilon Money does not underwrite the risk or act as an Insurer. The insurance products offered are underwritten by the respective Insurance Partners only.
Mutual Fund investments are subject to market risks. Please read all the offer related documents carefully before investing. Past performance may or may not be sustained in future.