Perspectives

Positioning portfolios in context of the Corona Virus (2)

Markets have been on a continuous sell-off mode since then. A draw down of 20% from peak in a year is not an uncommon occurrence.  However, we have all been surprised because we have not experienced it for a while.  And, unlike other corrections, we have all been surprised at the speed of the decline as it has come in less than 3 weeks.

Positioning portfolios in context of the Corona Virus (1)

The Corona Virus has given the markets a scare with the benchmark indices ending ~7% lower last week.   The large number of cases in Italy has understandably made participants nervous whether this is another normal correction or the start of something deeper and bigger.   

I am writing to share with you our perspectives.

Our perspective on the Bharat Bond ETF

We see two roles for “Debt” in any portfolio

• Yield – if the regular income is required to fund expenses.

• Optionality – if a debt instrument is liquid, it not only provides you a coupon, but also serves as a free Call Option to deploy additional capital in Equity markets/other Asset Classes if a very attractive opportunity came by.    Most investors rue having no Cash to deploy during a crisis when Equities are available at very attractive valuations.   Having access to Cash (ability to sell the Bond) + courage (ability to redeploy into Equities) are invaluable during a crisis.