3 financial mantras for your portfolio this Diwali

Diwali, the festival of lights, is not just a time for celebration and joy, but also an opportune moment to illuminate your financial future. As you bask in the glow of festivities and cultural traditions, consider these three financial moves to brighten your investment portfolio.

Invest in Hybrid Schemes
It is important for investors to recognise that different asset classes offer opportunities at different points in time. Some of the times, these are mega opportunities, wherein investors may not be comfortable investing given the heightened risk aversion.


For example: At the onset of the pandemic, Indian equities faced a sharp correction but several investors chose to remain on the side lines given that the uncertainty on how the future may pan out. At such times and on a daily basis, hybrid schemes like balanced advantage and multi asset category have the leeway to rebalance their portfolio continually, taking advantage of market volatility and dislocations, in a tax efficient manner. On the other hand, on an individual level, it is difficult for investors to continuously rebalance their portfolio, which is where hybrid investing becomes relevant.

We have always been strong proponents of asset allocation and multi-asset strategies. We believe that we are living in a time of volatility, rising inflation, and geopolitical unrest.

Furthermore, China's and the majority of developed nations' debt-to-GDP ratios are still quite high. As a result, there is a chance that volatility in the West will significantly rise. We think that in such a situation, using a multi-asset approach to investing is essential for better investment outcomes. Therefore, using a multi-asset fund, which helps investors have exposure to equity, debt, commodities, REITs, InvITs, and other asset classes, is one of the simplest ways for an investor to allocate to different asset classes.

Invest in Large Cap Funds
In the world of equities, large caps are market leaders across sectors and are beneficiaries of sector/industry growth. These are companies operating in industries where there are economies of scale owing to which they have a sustainable competitive advantage over smaller firms. When considering your investments this Diwali, allocating a portion of your portfolio to large-cap stocks can be a prudent choice. Valuation wise, large caps currently are hovering close to its long term average making it an attractive investment.

Invest in gold
Diwali, with its deep-rooted cultural significance, is also a time when many choose to buy gold. The yellow metal is known for its timeless store of wealth, retaining its value over centuries. In times of economic upheaval and currency devaluation, gold proves its worth as a secure asset. It excels during inflation, negating its effects and ensuring real growth. Furthermore, gold diversifies investment portfolios, offsetting risks associated with traditional asset classes like stocks and bonds.

At a time when the world is amidst geopolitical turbulence, US government debt-to-GDP nearing record levels, gold has once again emerged as a hedge against uncertainty. Of late central banks around the world have been increasing their gold holdings as a means to diversify their reserves away from the US Dollar.

Furthermore, this asset class has been an underperformer over the last decade when compared to equities, thereby providing a compelling case for investors seeking long-term potential. Owing to all these reasons, gold emerges as a prudent choice for investors. Investors can achieve this exposure through Gold ETF, Gold funds or Gold Fund of Funds.

In conclusion, this Diwali, seize the opportunity to enhance your financial well-being. Whether it is through diversification offered by hybrid schemes, the stability of large caps, or the timelessness of gold, these investment options can lighten the path to a brighter financial future.

(The author is Deputy CIO-Equity and Head of Research, ICICI Prudential AMC)