Welcome to another segment of IIFL’s Whatsnew. Today we are going to explain to you how you can create WEALTH during the global pandemic - Covid 19, yes you read that right! The rate of increase in the price of goods and services in India has been consistent compared to the returns generated via the money invested in banks fixed deposits and other traditional investment products. Therefore a trade-off arises as investors question traditional investment products to generate wealth. After understanding this problem IIFL in partnership with smallcase technologies has come up with a solution.
The stock market has generated a tremendous amount of wealth for investors who have the ability to look beyond short-term price fluctuations and hold onto their investments in all types of market conditions. Moreover, the Covid-19 pandemic has brought world economies to a standstill. With the stock prices being at their all-time low this could not be a better chance to invest in equities, however, no one knows how long this pandemic will last, and are unsure if the markets recover instantly. Due to the uncertainty investors are not sure whether they should save, invest in equities, commodities, and real-estate or opt for a traditional investment practice such as fixed deposits. What if I told you, you can invest in a product that consists of these asset classes, primarily focusing on generating long-term wealth even in bad market conditions.
“All Weather Investing” or AWI is a single smallcase consisting of equities, gold, and fixed income instruments, built using a low-cost ETF system. This basket offers an investment product that is (1) Liquid (2) Cost-effective and (3) Has a great value. What makes All Weather Investing so good is that every quarter a decision is made concerning the allocation of funds. For example, as Covid-19 is on the rise, interest rates have fallen therefore the allocation of funds in fixed income instruments has reduced. Similarly, the price of gold is on the rise causing an increase in the allocation of funds. To put it in simple terms, when the market goes up equity allocation builds wealth whereas when the market crashes gold provides a cushion, hence not laying all your eggs in one basket.
Monitoring current market situations alongside having a diverse asset class results in lower fluctuations providing a smooth wealth creation journey. The table below reflects the same:
As you can see in the table above the All Weather Investment strategy provides stable and long-term returns. Furthermore, in unstable conditions, it ensures that your investment does not sink with the market.
A common misinterpretation is that All Weather Investing smallcase is similar to a mutual fund. Unlike mutual funds, All Weather Investing smallcase is cost-effective as a mutual fund has an expense ratio of 1.5% in comparison to 0.6% of AWI. Consequently, you can view the weights of All Weather Investing and lastly it consists of different asset class part of a single instrument (no mutual fund can offer this).
Is AWI Corona Proof?
All Weather Investing significantly reduces the damage that a sudden market fall or prolonged recession can have on a portfolio. The allocation across assets follows a Sharpe maximization principle where excess returns of the portfolio are maximized for each unit of risk as mentioned previously, to illustrate; the exposure to equities is reduced if the markets are expected to be volatile vice-versa.
The figure above is a comparison of how large-cap equities have performed versus All Weather Investing smallcase during Covid-19.
All in all this product does not guarantee returns, nonetheless, it is less volatile and has generated better returns than the NIFTY.
How To Invest In All Weather Investing:
Successfully login to your IIFL Markets ID and click on the main menu. Please select the smallcases option as shown below. Make sure you have deposited funds into your account.
After you get redirected to the smallcase page kindly click on discover and type All Weather Investing in the search option.
You also have the option of making a one-time investment or monthly SIP. “Don’t let a down market get you down!”
Click here to access India’s best trading app and invest in All Weather Investing smallcase NOW!