Zerodha Co-Founder Nithin Kamath Offers Guidance on Navigating Market Volatility
Market Volatility Escalates as Investors Flee Risky Assets
The global equities market has been in a tailspin since the start of the US-Israel war with Iran, with investors fleeing riskier assets amid a relentless rise in crude oil prices. As a result, fears of prolonged inflation and potentially higher interest rates have made such assets less attractive. The sell-off is not limited to stocks alone, as other asset classes, including gold, are also under pressure.
The uncertainty in the market has left investors confused about where to park their investments. Nithin Kamath, founder and CEO of Zerodha, emphasizes the importance of diversifying assets even as market volatility persists. In a recent post on social media platform X, Kamath advised investors to stay invested during both good and bad times, as no one can predict which asset class will perform well.
To illustrate the benefits of diversification, Kamath shared an image showing the varying results of different investment strategies over a two-year time frame. The data highlights the importance of diversification in navigating market volatility.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
| Investment Strategy | Return over 2 years |
|---|---|
| SIP ( ₹10,000/month) with equal allocation across equity, debt, and gold | 18.1% |
| SIP with 60% equity, 20% debt, and 20% gold | 8% |
| Pure debt investment | 5.3% |
| Traditional allocation of 60% equity and 40% debt | -2.5% |
| Fully invested in equity indices (Nifty Large Midcap 250 and Nifty 500) | -7.8% and -9.1% |
Market veterans have consistently advocated for a disciplined and diversified approach to investing rather than chasing short-term trends. Warren Buffett, Chairman of Berkshire Hathaway, recommends the 90/10 rule for retail investors who may lack deep market expertise. Under this rule, investors should allocate 90% of their funds to low-cost index funds and the remaining 10% to short-term government bonds or securities.
Echoing a similar philosophy, Radhika Gupta, CEO of Edelweiss Mutual Fund, emphasizes the importance of steady, diversified investing. She allocates nearly 80% of her portfolio to what she calls "dal-chawal funds" – simple, non-glamorous investments such as hybrid funds and diversified equity funds.
Billionaire investor Ray Dalio has advocated the concept of the All-Weather Portfolio, a passively managed mix of assets designed to deliver returns higher than low-risk instruments while carrying significantly lower risk than concentrated exposure to equities or bonds. The All-Weather approach is not a fixed product but a framework that can be structured in multiple ways, with the core objective of building a portfolio that can generate returns meaningfully above cash and remain resilient across different economic environments.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Investor Takeaway
Investors should continue diversifying their assets even as market volatility persists.
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