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BASL Registration Number: 1951 | Non-Individual RIA. Regn No. INA000017620 | Validity Perpetual

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Where to invest in 2012?

The good thing about notching up the years in your own field of expertise is that you are considered to be somewhat of an expert and members of the media start calling you asking for your opinions on various issues. The downer is that the issues are the same and you tend to repeat what you said to some other publication a few months or a year ago. One favourite exercise of a lot of financial publications is to ask during the start of a year what investment strategies they have for their clients for this year. Recently I was asked what was I recommending to my clients for 2012 given the uncertainty in the stock markets and the general forecast being that of listlessness with a downward bias.

Hey, these are not my terms but the language of the market experts. This is a knack one develops over time to talk a lot without really saying anything. Coming back to the question of Where to invest in 2012? To my mind there is nothing special about 2012.

We believe in distributing eggs in different baskets, which is generally considered the first tenet of financial wisdom and goes by the name of Diversification.

The different baskets are:

  1. Stocks and equity funds basket, which eventually make me happy, but makes me endure a lot of pain while getting there.

  2. Deposits, bonds and debt fund basket which is there primarily to provide a counter balance to the above basket as also the basket to dip into if I need the money in next 2-3 years.

  3. Another one is the cash and liquid basket, which constitutes my bank balance or liquid funds. This is essentially for the proverbial rainy day but to some it also does the function of providing warmth of actual cash as against the distant coldness of the basket no.1

There could be many other baskets but these are the important ones. The challenge for the Advisor is to decide which basket to fill to what extent. The proportion is very unique to each individual.

After that it is easy, whenever I find that any basket depleted I look at the other baskets, which have gone over their prescribed limit. I just bring the money from the overfilled basket to the under filled basket.

This is what I have been doing for years and this is what I will do in 2012, 2013, 2014.

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