Will blindly investing in equities/bonds create the wealth you desire?

Investors have long enjoyed a non-stop rally since the 2008 crisis barring the temporary major blips in 2013 and 2020 owing to the Fed tapering tantrum and COVID, respectively. Persistent low interest rates across developed economies bought in enough liquidity in the system most of which were directly pumped into the equities markets, driving valuations sometimes higher than permitted.?

This has made investors so comfortable that they think the Fed will always come to rescue them. But the tide has turned now and all central banks - Fed, ECB, and BoE, are raising interest rates at a much faster pace than anticipated. This has created havoc in the stock markets and clearly, investors need to adjust themselves to move out of their comfort zone.

We might be trapped for the foreseeable future in two scenarios – stagflation, where returns to equity will be nil as it will be an era of high inflation and low growth. The other scenario is high volatility with limited upside returns in the foreseeable future. In both such scenarios, your corpus will get affected and you might take years to come out of it if not handled properly.?

If you would have invested in the Japanese economy in the 1990s, you would have made zero returns even in thirty years if you just followed the buy-and-hold strategy in only equities!!!! The myth of undertaking just SIPs or blindly investing in equities would have depleted your portfolio by multi-folds for years.?

So, you may be wrong my friend and you need to look into your assets and liabilities right now before it’s too late and higher interest rates start to have a double whammy effect on your corpus. Assets may deplete due to overexposure to equity markets while liabilities may start pinching due to higher interest costs.

In a nutshell, hard facts but a holistic informed approach is very much needed to manage your finances.