Global conflicts hitting your portfolio? Here’s how to stay safe and prosper

Markets may react sharply to wars, trade disputes or political tensions, but uncertainty has never been an exception in investing

• Uncertainty is permanent in investing; discipline is key.
• Markets rebound from shocks; stay focused on long-term goals
• Diversify, rebalance, and stagger to manage volatility

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Global conflicts, trade tensions and market swings often leave investors anxious about what lies ahead. Experts say uncertainty has always been part of investing and reacting emotionally can do more harm than good.

While geopolitical events may create short-term volatility, disciplined investors who stay focused on long-term goals are usually better placed to protect and grow their wealth over time.

Uncertainty is permanent

Experts say investors who accept volatility as part of the journey are often better prepared to make rational financial decisions.

“The honest answer that most people don’t want to hear is this — nobody knows how long geopolitical uncertainty will last or how deep the market will fall because of it. Not me, not any fund manager, not any economist. The sooner investors accept that uncertainty is a permanent feature of markets and not a temporary visitor, the better their financial decisions will be,” said Jiral Mehta, senior manager-research at FundsIndia.

Accepting uncertainty doesn’t mean sitting on your hands. Build a plan that works regardless of what happens next.

Looking back at over 46 years of Sensex, a 10–20 percent fall in a year is almost a certainty. Yet in three out of four years, markets ended with positive returns. The current decline, unsettling as it maybe, fits a pattern that long-term investors have navigated many times before.

“The instinct during geopolitical stress is to pull out and wait for the ‘all-clear.’ But markets rarely send that signal clearly. By the time investors feel comfortable re-entering, a significant part of the recovery has already happened,” Mehta said.

Investors should focus less on predicting short-term events and more on maintaining a disciplined investment strategy, experts say. Markets have recovered from periods of geopolitical and economic uncertainty over the long run.

How to stay safe and grow wealth

For investors with fresh capital to deploy, caution doesn’t mean waiting indefinitely. Have a deployment plan in place. By staggering your entry, you avoid the risk of betting everything on a single price point and are also not sitting on the sidelines, waiting  for the market to recover.

Mehta said, “For those who are already invested, they must maintain their original asset allocation between equity and debt, rebalance if the asset allocation deviates more than 5 percent from their intended allocation.”

One must balance caution with opportunity by replacing emotion with a framework. Know your asset allocation. Stagger your investments. Don’t try to time the bottom.

“Historically, market corrections triggered by geopolitical uncertainty have often created attractive entry points for long-term investors. The bigger risk is often the opportunity cost of staying out of markets, as a handful of strong recovery days tend to drive a large share of long-term returns,” said Alekh Yadav, head of investment products at Sanctum Wealth.

Periods of uncertainty call for discipline rather than aggressive positioning. Experts say investors should focus on diversification across asset classes, sectors and geographies while favouring high-quality businesses with strong balance sheets, pricing power, and resilient earnings.

“Instead of making bold, concentrated bets, market corrections can be used to gradually increase equity exposure in a measured manner,” Yadav said.

Maintain adequate liquidity for navigating volatility and capitalising on opportunities during dislocations, experts say.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.