Strategy for equity portion of the portfolio

The stock market is likely to do well in 2010, albeit with increased level of volatility. However, considering that equity as an asset class performed exceedingly well from 2009 lows, it would be advisable to exercise a little caution during 2010. The out-performance of mid and small stocks over the last six months or so may be tempting enough to go all out for them but the key would be to resist the temptation and focus more on your own risk profile and the existing portfolio mix. While for those who intend to invest directly in stocks, the success would depend on the right stock selection, for mutual funds investors the correct strategy would be to go for funds that have a well defined strategy and investment universe so as to retain control over the exposure to different market caps in the portfolio.

For those investors who have been investing through Systematic Investment Plan (SIP), the key would be to carry on that process and try to increase the investment amount in keeping with the increased income levels. Those who had discontinued the process during the market downturn need to restart the process all over again. If 2010 turns out to be a volatile year for the stock market as expected, the section of investors that would benefit the most would the one that follows a disciplined approach.