Need for a global portfolio

Financial planners and wealth managers suggest asset allocation based on one’s risk profile. It is a pertinent question to ask ourselves that when we are always trying to reduce the overall risk in our portfolio, why shouldn’t we also look at the risk of investing only in one country, India. For a person with no connection to our country, the mere mention of India may arouse a variety of concerns—one of the lowest per capita incomes in the world; high corruption; sketchy infrastructure; high inflation rate; high interest rates; a stock market that is primarily dependent on foreign flows; weak currency; high trade deficit; volatile political scenario. High growth economy; largest democracy; favourable demographics with a very young population; a fast growing middle class; good business sentiment; large domestic demand; a large English speaking population; large number of well educated professionals, and so on. So, when the Reserve Bank of India increased interest rates overnight in July last year, everyone who had exposure to long-term debt funds suffered.