Why Boring Is Good For Your Financial Health

By: Tavaga Research

In the midst of utter chaos in the markets and panic among investors, being boring seems to be the smartest choice. When everything is going haywire, there are some who are sitting back without worrying too much. These are the passive investors with conservative portfolios.  

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They are the conservative investors, who are often known as boring investors. They invest mostly in the safest of all asset classes while diversifying their investments.

We take a look at the performance of the Tavaga conservative investor vis-a-vis the benchmark Nifty index during the volatile Covid-19 Pandemic

The table above is the daily performance of Nifty50 and a Tavaga conservative investor in the two most volatile months of February and March 2020.

While everyone on the Street was just fighting to survive, the conservatives’ consistent approach remains immune to the forces bringing on a bloodbath in the markets.  In the current scenario with lockdown again in the economy, markets are correcting and investors are looking for the right stocks to invest. In such a scenario, with Nifty already taking a breather from highs, investing in ETFs serve the purpose of easy investments, higher returns and portfolio diversification.

SBI Nifty-50 ETF Performance

We, at Tavaga, keep getting requests from clients to upgrade their risk profile and add more risky assets to their portfolio, even from those with a risk profile that leans towards a balanced or conservative portfolio. 

In the current market situation with high volatility returning back to markets, such investors, with a mismatch in strategy (aggressive) and risk profile (conservative) are in danger. They are more likely to panic and sell, liquidating their investments and racking up their losses. On the other side, investors with funds parked in broader market portfolios and ETFs are relaxed because the of the bullish trend in the long term and expectations of market bounce back in the near term.

That is what makes us say, ‘Being boring with investment strategy may prove to be rewarding’.