What drives investors to seek alternative strategies amid market volatility?

In today’s market environment characterised by volatility, investors have been grappling with apprehension and have inclinations towards withdrawing capital or strategizing for minimising losses. Yogi Berra’s renowned quote, “When you come to a fork in the road, take it,” emphasises the importance of making informed decisions and embracing calculated risks. Market fluctuations, influenced by diverse factors, inherently exist; this uncertainty may present investors with opportunities to explore alternative investment avenues.

Despite the substantial post-election intraday downturn of up to 8.5%, it is imperative to acknowledge that market fluctuations are to be expected. Adopting a thoughtful approach can equip investors to weather periods of volatility, which may potentially become more prevalent in the future.

The Nifty index, a pivotal benchmark, erased all 2024 gains, descending below 21,300 to conclude at 21,884.50, whereas the Sensex closed at 72,079.05, indicating a substantial decline.

Sudden reactions, such as panic selling, can be detrimental during these times of volatility. This article aims to furnish essential insights for effectively navigating the turbulent market.

Stay calm, focus on long-term goals

Amid ongoing market volatility, it is essential for investors to consider and contrast traditional and alternative investment approaches to make well-informed decisions that can safeguard their portfolios from uncertainty and cultivate potential for future growth. Additionally, it is crucial to remain composed and refrain from making hasty decisions driven by apprehension. Although market fluctuations may be perplexing and disconcerting, they are inherent in investing.

Historical patterns indicate that markets typically recuperate over time, benefiting those who maintain their investment strategies. Investors should periodically review their long-term objectives and ascertain that their investment tactics are in line with their goals. Importantly, they should not be daunted by transient downturns in the market, as these often precede recoveries.

Focusing on identifying long-term goals such as retirement planning, estate planning, child education, or property acquisition and subsequently evaluating the investment products available in the market is paramount. Investments in any product should be contingent upon individual goals.

Diversification as a necessity not a strategy

Market volatility, like the recent downturn, highlights the importance of a balanced and simple portfolio. This strategy involves carefully allocating your investments across various asset classes, such as equities, bonds, real estate, and even gold. The ideal mix depends on your risk tolerance and long term goals. Diversification spreads risk across different asset classes, helping to mitigate the impact of market fluctuations on the overall portfolio.

During periods of market decline, some sectors may become undervalued, presenting opportunities to buy at lower prices. Investors should consider increasing allocations to these sectors, particularly those poised to benefit from the evolving political and economic landscape.

The current economic landscape necessitates a thorough reassessment of investment strategies and an inclination towards exploring alternative avenues that offer stability and potential growth. For instance, diversifying into international markets can mitigate country-specific risks and unlock opportunities in other economies, particularly when the domestic market is volatile.

Furthermore, historical observations reveal the upward trajectory of real estate, despite fluctuations in property values. Over the past six years, there has been increased Foreign Direct Investment (FDI) in real estate, growing interest in Real Estate Investment Trusts (REITs), and the emergence of Fractional ownership which is proposed to be Small-Medium REITs (SM-REITs). The current market size of Indian commercial real estate stands at USD 40.71 billion and is projected to reach USD 106.05 billion CAGR by 2029.

Consequently, investing in real estate through newer avenues such as SM-REITs, which offer a diversified portfolio of real estate assets, presents an attractive option. SM REITs often yield higher dividends compared to larger REITs and can capitalise on niche market opportunities. SM-REITs offer the dual benefit of income generation and portfolio diversification, allowing investment in premium commercial real estate across major metropolitan cities in India.

In conclusion, as the spectre of market volatility looms large, investors and decision makers are increasingly looking to alternative strategies to insulate themselves and position for future prosperity.

Shiv Parekh, Founder & CEO, hBits


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Published: 21 Jun 2024, 09:18 AM IST

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