Global equity markets on Monday saw massive selloffs triggered by US economic slowdown. In India, benchmark indices Sensex and Nifty plunged over 3% each intraday tracking Asian peers. Japan’s Nikkei tumbled by 12.4% and South Korea’s KOSPI dived over 8%. In Asia, other markets like Taipei, Jakarta, Hong Kong and Shanghai were also down significantly.
In the US, July payroll data released last Friday showed the unemployment rate has surged to near a three-year high of 4.3% against 4.1% in the previous month. With this, July marked the fourth consecutive month of rise in the unemployment rate in the US.
The global stock market is experiencing a significant downturn, triggered by fears of an impending US recession and a flight towards safer investments. And when the US catches a cold, can Indian markets be far behind?
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Where should you park your money in these turbulent times?
In these turbulent times, investors are grappling with crucial decisions about where to allocate their funds for optimal returns and risk management.
Experts emphasize the importance of a well-structured asset allocation strategy, particularly highlighting the potential benefits of dynamic asset allocation products like balanced advantage funds, which adapt to market fluctuations in real time.
“The Nifty has dropped by 2.4%, reflecting the broader global market downturn as fears of a US recession prompt investors to flee from riskier assets, anticipating that rate cuts will be necessary to stimulate growth. In light of the current market turbulence, it is crucial for investors to carefully consider where to allocate their funds. A well-thought-out asset allocation strategy is key,” says KS Roy, a personal finance expert.
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For those uncertain about the best course of action, dynamic asset allocation products such as balanced advantage funds can offer a balanced approach, adjusting to market conditions in real-time, he adds.
For investors looking to navigate this period of market volatility, there are several strategies to consider. If the market climbs from this short downtrend: Consider investing in equities or equity mutual funds with a focus on high-quality stocks that have shown resilience, suggests Roy, adding that diversifying across sectors that are less sensitive to economic cycles can also provide stability. “If you want to play safe across asset classes, try multi asset allocation funds.”
Safe haven assets can be a good bet at this stage
If this marks the beginning of an extended bearish phase, then consider shifting focus towards safer asset classes such as fixed-income securities (and debt funds), gold (and gold ETFs), or defensive stocks can help mitigate risk. Additionally, exploring hybrid funds that blend equity and debt can offer a balanced approach, providing growth potential while cushioning against downturns. Risk-averse investors can choose safer hybrid fund strategies such as conservative hybrids, and arbitrage funds.
Investors should stay informed and maintain a flexible investment strategy to navigate these uncertain times effectively.”
