Markets and your investment portfolios have had a topsy turvy 2018 and ending the year off highs on equities while government bonds have largely rallied. In fact, government bond funds have been the best performers in 2018, turning around the concept of higher risk and higher returns as government bonds are the least risky in nature, carrying only interest rate risk. Table 1 shows returns of various funds in 2018.
Would it have made sense to book profits in equities in the early part of 2018 and invested in government bonds? In hindsight yes, but it really depends on the long term objective of wealth creating.
Growth stocks are the best investment for long term wealth creating and given the nature of markets, there will be periods of volatility in returns. Over a longer period of time, good equity portfolios will see returns smoothening out and continuing to deliver performance over a period of time.
Hence, long term equity portfolios are better off staying in good stocks and any restructuring is stock specific rather than asset class specific.
2019 brings some uncertainty to equity given general elections in India and global issues of trade wars and economic slowdown fears. However, on the positive side, job markets are still tight in US and improving in Eurozone, inflation is down, interest rates are still low, oil prices have come off and equity valuations are down. All this bodes well for equities once election uncertainty passes.
Wish you all a Healthy 2019.