How to battle Rising Interest Rates? As a retail investor!
One of the most illogical steps taken by retail investors is to mimic the portfolio strategy followed by a few HNIs.
Here's why if you are a retail investor, don't follow the strategy of an HNI:
Majority HNIs invest in AIF, Pre-IPO and another bunch of high risk: high reward assets. And quite frankly, this bodes well for most people: during BULL runs.
However, when markets and economies are in periods of distress, valuations tumble excessively. What fared well during the bull-run, barely survives during the bear run since cash-burning companies rarely have anyone to provide them with cash.
HNIs are slightly more sophisticated investors who understand the risk. Along with understanding the risks, they also have the means to deploy more capital when prices are lower, which retail investors probably might not be able to do.
And of course, wealth is only made in valleys, not hilltops. Right?
So, if you neither have the risk appetite nor the cash, please stay away from those types of investments.
Then what should you do to curb inflation and battle the rising interest rates?
Right now we are suggesting three things.
Short-term should remain in arbitrage kind of opportunities because we don’t even want to expose ourselves to the shorter end of the yield curve right now.
For the medium part, we use target maturity funds predominantly at this stage. And for any yield kickers, we are still using Invits. Real Estate Investment Trusts (REITs) or commercial real estate (CRE), which are hybrid asset classes, are proving to be good income generators as they benefit from rising inflation.
For long-term increased allocation to equity despite the dip, which is a proven instrument to grow huge corpus and combat bond yields and inflation.
Cheers!
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Mid-Week Wisdom:
“Wisdom cannot be imparted. Wisdom that a wise man attempts to impart always sounds like foolishness to someone else... Knowledge can be communicated, but not wisdom. One can find it, live it, do wonders through it, but one cannot communicate and teach it.” – H. Hesse, Siddhartha
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