Risk Is In Your Portfolio, Not In The Market, Says WhiteOak's Aashish Sommaiyaa
Themes have seen much larger inflow and they bring risk to one's portfolio, he said.
The volatility in the market seems to be impacted by the sheer ripple of certain news, events and even anticipations. Yes, there are elements like policy changes or global cues that have direct impact on the market.
But unlike the common notion, these elements alone do not determine the risk an investor is taking. More often than not, these changes are outside one's control and one should look into their own portfolio to asses risk, according to Aashish Sommaiyaa.
"Risk is in your portfolio and not in the market. Things around and people change, that is out of our control," said the chief executive officer of WhiteOak Capital Asset Management. Investors have poured money on to equity markets and the category that has managed to give relatively stable returns have only seen little inflow.
"Only 4% of equities went into large-caps. Themes have seen much larger inflow and they bring risk to your portfolio. Assets have been allocated into cracks and crevasses of the market in hopes of outsized returns," said Sommaiyaa. Highlighting the importance of balancing risk from within the portfolio, he noted that investing in specific themes may not be the best bet.
"Come back to the neutral stance, allocate back to large caps as well. The darlings of the previous years are lagging and the ones dragging have performed better. There are corrections that have already played out," he said. Revisiting the asset allocation in one's portfolio first will help balance the risk and not run away from it.
Safe And Staggered Approach
Talking about the changes in the portfolio that one can make ahead of the new year, the advice is to align holdings with goals.
"Large caps have taken the corrections already, so we're overweight on that. We are seeing volatility, but we are staggering the inflow. Hybrid and multi-asset funds are also included to have a safe and staggered approach," said Ruchi Sankhe, investment advisor at Infinity Investment Advisors.
Investors need to identify the pockets of value that can balance the risk taken with returns. She recommends that investors spread their investments across categories and pace the deployment of the funds.
