Take stock, but don’t part with debt

The sensex has breached Mt 30k with the market capitalisation of companies listed on the BSE surging past Rs 1 lakh crore mark. But in a break from recent rallies, equities have emerged as the clear winners. Gold and silver, which delivered solid performance even during the 2007-08 stock market rally and managed to post a steady growth during the post-election rally in 2009, have come up with a poor show this time.Here is a snapshot on what is in store investors following the sharp rally in equities.
Play equity game longer
Equities have raced ahead of other asset classes attracting investors in droves. But the run-up in equities mean that valuations are no longer cheap. Experts say investors should consider equities as a long-term option. “Investors should not get carried away by the euphoria. They should invest in equities with a five-year horizon,” says Suresh Sadagopan, founder, Ladder7 Financial Advisories.
“Investors can make handsome returns in equity in the next 3-5 years,” says Rupesh Nagda, head, investment advisory and products, Alchemy Capital Management. “Earnings are looking good. But investors should not look at equities in the short-term as valuations are not cheap,” he says.
Fixed income gains traction
With interest rates softening, fixed income has become an attractive investment option. While gilt funds, which invest in government securities, have surged 18.75% in the past one year, other fixed income options have given 8.7%-14.3% returns.

Rebalance portfolio
Surging stock markets has resulted in a heavy tilt towards equity in investor portfolios. Experts say that investors should rebalance their portfolios to reflect their original asset allocation plans. Rebalancing would be needed in cases where the share of equity has gone up to 80%-85% of the portfolio, they say. “Proper asset allocation and disciplined investing have delivered the best returns,” says Anil Rego, CEO, Right Horizons, a wealth management firm.
Keep gold as hedge
Gold is clearly on a downward spiral having lost 13.7% in the last one year, the worst performance among widely traded asset classes. But the yellow metal is still the best bet against global risks and inflation, investors should allocate some money to gold, advisors say.