Proactive approach helped beat volatility
Keeping an open line of communication with clients and keeping them focussed on goals and tenure helps
The year 2018 has been tough for investors as they had to deal with a volatile market. Sensex saw a return of about 1.89% year-to-date in 2018 and fell 116 times out of 244 trading sessions. Markets reacted to external events that headlined 2018 like the rupee fall, hike in oil prices and credit default of NBFCs like some IL&FS Group companies. It is at such times that investors need the reassuring hand of a professional.
For Shyam Sekhar, chief ideator and founder, iThought, 2018 would be one of those years when they helped clients, especially the newer ones, stay calm. “2018 was about a volatile market, rupee fall, spike in oil prices and exit of FIIs from markets. And somehow a narrative was built that these events would reverse any economic benefit. Most investors were aware of this narrative and were unsure of investing in the markets, and the younger clients were more worried,” said Sekhar.
iThought is a Chennai-based financial planning firm that was founded in 2009. It now has a client spread of around 500 across the country and manages assets of around ₹500 crore. According to Sekhar, it’s not just about calming clients down, it’s also about adopting a proactive approach rather than a reactive one. “A little bit of foresight and preparedness on part of the planner is essential in handholding the clients. We have had a very good run in the last four years and there were all signs that we had peaked. So early this year, we moved our client’s money from equity and insulated them from volatility but now we will be investing aggressively,” said Sekhar.
“We stayed away from funds with exposure to NBFCs as our view of the sector was negative. So the impact of IL&FS default was not felt on our clients’ portfolio and that was reassuring for them,” he said.
Being in touch with clients during difficult times is essential, but according to Sekhar, it’s also important to ease them into equity investments gradually. “Every planner explains the benefits of entering the market at a low, but it’s much more difficult to get new clients to invest aggressively during a bear market as they haven’t seen the cycle of markets moving up and the returns they make,” said Sekhar. “This year we helped our clients invest slowly and scaled them up gradually. We took stock of their financial lives and if there were things that needed attention like repaying a loan we encouraged them to do so. We waited for them to ease up,” he added.
The conservative call that the firm took at the beginning of 2018 bolstered the confidence of clients as they were insulated from volatility to a large extent and now are ready to be more aggressive, feels Sekhar. “Of course there will be losses as there will be underperformance because you have stayed away from the markets, but I think that’s better because one can always catch up and it’s easier to explain to clients,” he added.
Market volatility was what kept people on tenterhooks but, according to Sekhar, keeping an open line of communication with clients and keeping them focussed on their goals and time horizon helped.
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