Investment outlook 2022: Approaches to increase success in uncertain times

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With the spread of Omicron, there is feeling of déjà vu. In an uncertain world, making investments requires skill. A few foundational principles come to mind which might help us navigate the complex world we are in today.

Creating a winning portfolio this year requires more skill, tenacity and conviction than usual. Let us examine some key trends.

1. Interest rate hikes are likely to be gradual both in India and overseas.

2. Economic activity on capex is likely to start post the elections in 2024 and not before as in the last year of a government rarely anything meaningful happens, however that still remains to be seen. Things keep on changing and in the next 18-24 months don’t see any major capex happening.

3. Stabilisation of economic activity is more likely to happen once the entire population gets a booster, which is likely in the next 2-3 quarters.

4. Government support is there however rural has its own challenges as of now. Income increases are likely to take a bit longer.

5. Currency is likely to be rangebound as there is no off-balance sheet funding needed by the Government.

If you are an entrepreneur/self-employed, you need to:

  • Have emergency expenses of at least 1 year, ideally 2 years.
  • Start your SIPs over a ten-year period. It can yield good returns in stocks as well as mutual funds.
  • Invest in yourself.
  • Make the business an asset over a period.
  • If you are a working professional, it depends on your risk-taking capacity as well as your vision of the future. If you are looking at a possibility of being an entrepreneur you need to plan for the next decade.
  • If you have loans, it is optimal to add investments in a moderately rising interest rate cycle. This helps to earn more. Therefore, if the return on portfolio is 15% and 7% is the loan rate, you are likely to make 8% more per annum over the medium term.
  • However, it is also good to have the sight of a good shopper, sometimes assets are available at a bargain. If we see a dip in the markets, it could be an attractive opportunity. Diversification is an important principle to keep in mind whether the investment is in stocks or equity-oriented opportunities.

This year is more of cycling through the zigzag terrains. Enjoy the moment!

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