Reallocating Your Investment Portfolio: A Profound Analysis
Key Takeaways
- The current stock market trends and the potential for a transition period.
- Identifying your investment type, whether you're a trader, investor, or prefer fixed income securities.
- Opportunities for high return investments in fixed deposits such as Unity Small Finance Bank, offering up to 9.5% return on investment.
Are we on the Verge of an Investing Shift?
The stock market is currently reaching all-time highs, coaxing investors to question whether they should book profits and reconsider the structure of their portfolios. This is especially true as markets appear to hover or slow down when they're close to crossing the all-time high or inching near to 22,100. A solution that arises in this situation is reallocating from market securities to an investment avenue offering fixed returns, ideally up to 9.5%.
Technical Analysis: Reflecting on Past Trends
Technical analysis provides valuable insights on future market possibilities based on past patterns. For instance, significant ups and downs, coupled with periods of consolidation, have been noted in the Nifty chart's weekly timeframe. The discussion is not intending to guarantee future trends but to understand probabilities of potential events, like consolidation phases, which might be handy to know considering the current market highs.
A vital analysis paralleling the present context was the scenario back in 2019 - an election year just like 2024. The observation period covers the pre-election phase from February to post-election month, August. Interestingly, 2019 saw a 7.7% growth in the market, followed by profit booking in the subsequent months, signifying a meager 200 points move over the six months. Such sideways trends often lead investors to consider alternative investment avenues.
Types of Investors
It's essential to understand where you fall among the types of investors: stock market investors, stock market traders, or a third category favoring fixed returns over equities.
Among investors, there are two kinds - Category A investors who have a long-term view of holding onto stocks for five to ten years and are unbothered by market volatility. Their query of 'when to book profit' becomes irrelevant. But then comes Category B investors, those with idle cash at hand. Given the market's current state, they ponder on where to park their extra money, instead of pumping more into an already high market.
If you are a trader in the stock market whose primary focus is capital trading, it would be beneficial to divert around 20% of your resources to generate fixed returns. Those in the other category, inherently interested in fixed income securities, may be looking for stable investment avenues.
Exploring Fixed Return Investment Opportunities
This part of the blog will focus on opportunities for high-return fixed deposits. Analyzing options offered by different banks, it is discerned that Unity Small Finance Bank provides an appealing rate of up to 9.5%, with a minimum investment of just 1,000 rupees.
One important aspect to note here is that deposits with Unity Small Finance Bank are insured by DICGC (Deposit Insurance Credit Guarantee Corporation) up to a limit of 5 lakh rupees. Thus, even in a worst-case scenario, deposits stand insured up to that limit.
Risk Analysis
Two risk types are associated with this kind of fixed deposit: Default risk, which is virtually nullified up to INR 5 lakh due to DICGC's insurance, and Liquidity risk. In the case of the bank defaulting, deposits up to INR 5 lakhs are processed within 90 days, thus mitigating the liquidity risk.
How Much Should You Invest?
While this differs from person to person, a sensible approach suggests starting with an amount that offers peace of mind, and then gradually increasing based on comfort.
With this information, it becomes easier to make decisions about when to book profits and how to reallocate investments. Sharing this value-filled information with friends might just help them too navigate their investment journey better.