Substantial investment in the defensive sector reduces portfolio risk.
Investors have turned positive for investment in 2021 this year due to the performance of the equity market in 2020 last year. Despite the worst epidemic of the century, stock markets around the world are doing better. In addition to the development process and economic recovery on Corona’s vaccine, the equity market has also got better support due to monetary and fiscal policies.
Last year 2020 will be memorable for investors when record fluctuations were observed. In a way, the market indices were on a roller coaster ride. However, such fluctuations can be prevented from having a greater impact on the portfolio through Proper Asset Allocation depending on the financial target, the time taken to achieve the financial target and the ability to take the risk. In order to get higher returns in 2021 this year, investors should keep many things in mind such as constantly updating the portfolio and stay away from speculative stocks.
Companies’ profits will increase
Usually most of the businessmen are making their preparations according to the circumstances arising out of the corona epidemic which is now being considered as new normal. Consolidate balance sheets of small, medium and large companies are seen, the losses that are caused by the Corona epidemic are being recovered rapidly. In some sectors, recovery is happening faster than expected. In such a situation, investors can expect a faster recovery and in the coming quarters one can also expect an increase in the profits of companies.
Rebalance your portfolio
At this time, it is very important to take a decision to rebalance your portfolio because asset classes do not always move in the same direction or at the same pace. The portfolio in which most of the investment is in equity shares depends on the returns from equity. Their volatility is very high. Investors do not control volatility, but they can reduce the risk of their portfolio through asset allocation. According to studies, investors who have revised their asset allocation from time to time, have got better returns than investors with fixed portfolios.
Keep an eye on these stocks
The economy is recovering after recovering from the Corona epidemic. In such a situation, many stocks can get good returns from investors, which had declined in 2020. Investors should keep an eye on stocks containing banking, consumer products, energy and industrial goods. Investors should buy shares of these sectors. Recovery is expected in the IT sector as well. After the Corona epidemic and the vaccine, spending on luxury goods may increase. Apart from this, stocks of cement, house materials suppliers, industrial and capital goods will also be better for investment. There are many forma companies in the country that export large quantities of medicines, investors should also think about investing in their stocks.
Invest sufficiently in the defensive sector as well
This year, in 2021, investors expect a better return on equity, but risk will always be associated with equity. In such a situation, investors must keep some defensive stocks in their portfolio. These types of stocks have low business risk and financial risk is also not high. If there is a decline in them, then it is much less than the decline in the overall market. Such as food and beverages, pharma, public utilities stocks. Earnings increase continuously and there is consistency in performance.
Stay away from speculative stocks
Speculative companies are companies that have very large risk invoices and there is also a possibility of higher returns. However, the possibility of low or negative returns in such stocks remains very high. Specifically, speculative stocks can be called stocks that are over-valued. Due to this, anytime there is a price correction in the future, you can get very low or negative return on investment. Investors should stay away from such stocks.