How high net worth individuals need to navigate market volatility

Even though High Networth Individuals (HNI) have significant financial resources, market volatility in India can still pose a challenge in generating consistent returns. HNIs often have a significant portion of their wealth invested in the market, making them more vulnerable to substantial losses during downturns.

Maintaining emotional discipline is key during market downturns. This factor is very important for Uninterrupted Compounding, a philosophy that Dezerv uses to generate long-term wealth over episodic spurts of high IRR.

A few ways in which the volatility can be managed are given below.

Strategic Asset Allocation

● Imagine all your eggs in one basket. Now, imagine a market crash. Not a pretty picture, right? Diversification is like having multiple baskets across different asset classes – equities, debt, real estate, and even alternative investments. When one asset class dips, the others can potentially hold steady, minimising your overall portfolio’s market risk.

● Market volatility is like a bumpy ride. But with a diversified portfolio, the bumps become smaller, and the journey becomes smoother. Diversification helps average out your returns, offering more predictability and peace of mind.

● Diversification allows you to customise your asset allocation based on your risk tolerance. Feeling adventurous? Allocate more to equity funds. Prefer stability? Lean towards debt funds.

● A diversified portfolio is like a financial security blanket. Knowing you're not overly reliant on any single asset class can prevent emotional decisions during market downturns and you'll be less tempted to panic sell and can focus on your long-term goals.

Active Portfolio Management

● Unlike a passive approach, active portfolio management involves a dedicated team keeping a watchful eye on your investments. They constantly analyse market trends, company performance, and economic data to make informed decisions about your assets.

● Markets can be unpredictable, and even small fluctuations can significantly impact your wealth. Fund managers can react swiftly to these changes, adjusting your portfolio allocation or seizing new opportunities that arise as they watch the market day-in day-out.

● Everyone has unique financial goals, and a one-size-fits-all approach doesn’t work in all cases and fund managers take the time to understand your risk tolerance, investment horizon, financial goals and aspirations. Based on this, they craft a personalised strategy to help you achieve your goals, even in volatile markets.

● Market volatility can be stressful, but with active management, you don't have to do it alone. A team of experts is there to make informed decisions and protect your wealth, freeing you to focus on your business ventures, family, or whatever else matters most, knowing your investments are in good hands.

Sophisticated Investment Options

● Sophisticated options like private equity, hedge funds, angel investments and venture capital can offer diversification and potentially exponential returns. Imagine investing in exciting startups or having access to other exclusive investment opportunities not available to the average investor.

● You can choose investments that align with your risk tolerance. Want aggressive growth with the potential for high returns? Consider venture capital and if looking for more stability with alternative income streams, Real Estate Investment Trusts (REITs) might be a good option.

● The Indian market is vast, but the world is even bigger. Access to international markets, allows you to diversify your portfolio geographically and potentially hedge against local market fluctuations.

● While past performance is no guarantee of future results, these options have the potential to outperform traditional asset classes. This can help you achieve your long-term financial goals faster, whether it's funding a luxurious retirement, leaving a legacy for future generations, or pursuing philanthropic endeavours.

Long-Term Perspective

● Don't get caught up in short-term market gyrations and remember, you're likely invested for years, even decades, to come. Focus on your overall asset allocation strategy and resist the urge to make impulsive decisions based on daily headlines.

● During volatile times, high-quality companies with strong fundamentals and a proven track record tend to be more resilient. Consider focusing on these companies within your equity portfolio for potentially better stability and long-term growth prospects.

● Market corrections are a natural part of the investment cycle. Resist the urge to panic and sell your holdings at a loss. History shows that markets tend to recover quickly over time.

● While navigating volatility, be mindful of the tax implications of selling assets. Talk to your tax advisor about strategies to minimise potential tax burdens.

Staying Updated

● The Indian market is increasingly interconnected with global events. Stay informed about major economic developments, political situations, and policy changes around the world that can impact the Indian market.

● Review your portfolio allocation periodically (every 6 months or annually) and rebalance if needed. The portfolio allocation can be changed based on the consultation with your investment expert.

Remember, market volatility is inevitable. By employing these strategies Dezerv follows the Future Focused Approach, being mindful of the past but prioritising future opportunities and trends to guide the investment decisions, enabling HNIs in India to navigate these fluctuations and position their portfolios for sustainable growth.