Several readers have asked us how to invest as the market reacts to the US tariffs. Regular readers would know what our stance is. The following is for those new here.
The short answer is that your investment strategy should be independent of “current market conditions” or events. If it is dependent, you need to act now, or the fate of your hard-earned money rests on luck. Surely you respect your money better than that!
Every time an equity investor (MF or direct equity investor) wants to (publically) pull out of the market, there is a chorus that goes “stay invested” and other confounding blah blah.
However, the problem is that most investors have no concept of when not to use equity and even lesser knowledge about asset allocation. For example, I have seen several investors expect huge returns from the marker in the next 2-3Y, and they have not invested elsewhere (100% equity). The regular “stay invested” chants will not apply to them.
If you want money in the next 1- 3 years, you have two choices (IMO):
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
- Assign your equity investments to long-term goals and invest as much as possible in safe fixed income you understand (bank RDs and FDs are more than fine). Postpone your needs if possible.
- If you cannot postpone your needs and if you cannot find enough money to fund the goal via simple fixed income products, redeem equity and shift to fixed income. Please note: No one knows what the market will do tomorrow, over the next six months or next year. What I have suggested is for you to sleep better. If you value FOMO more than your sleep, that I cannot help.
If you want money in the next 5- 10 years:
- Limit future equity investments such that your equity asset allocation is no more than 20% to 40% (the sooner you need money, the lower the allocation)
- Every few years, reduce the equity allocation and shift existing investments and future investments to fixed income. Plan for reduction today so that you can invest enough.
- If you can do this, then you don’t have to worry about tariff wars or other events.
- Note: This is not a guarantee of success. It is only a plan to take you as close as possible to your target corpus -with some luck you may end up with more. Again this is only for those value their sleep.
If you want money after 10 years (preferably longer):
- Limit your equity allocation to 50-60%.
- Have a plan to reduce equity allocation in a step-wise manner, starting several years before the goal deadline. Our robo-advisor tool automates this risk-reduction asset allocation scheme while planning for goals of any duration. Our research suggests that such an asset allocation scheme can work well regardless of market conditions.
It is not worth your time and energy to start worrying about your “investment strategy” whenever something spooks the market. We must recognise that something will always move the market up or down and develop a goal-based risk reduction strategy.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)