"Watch the oil!"
No. It is not a call from a diet-conscious investor at his family's dinner table. It is the other oil that is boiling his portfolio – crude oil. When pain at the pump seeps into pain in the portfolio, it is time to review the portfolio.
Philosopher George Santayana's famous words, "Those who cannot remember the past are condemned to repeat it," come hauntingly. For knowledgeable investors, there is precedent: same place, different time.
This Time It Is Not Different
Circa 1979. Shah of Iran was overthrown. Oil markets boiled and stock markets went belly up. Nations, big, small, or powerful, learned one common lesson: energy vulnerability threatens total economic stability.
Circa 2026. Same place, same situation. Only this time, the world is more connected. It needs more oil to run it day after day. Economists, governments, portfolio managers and investors all dread one word – inflation.
In between the two oil shocks, we have gone through booming economic times (80's to 90's), economic reforms in India, the dotcom boom and bust, the 2008-10 global financial crisis, and COVID.
United We Fall, Diversified We Succeed
Of all the seven deadly sins, the one that hurts you most financially is greed. As South Korean investors learnt over the past couple of months, you cannot place your bets only on one theme, in their case semiconductor chips.
The answer lies in the adage – don't put all your eggs in one basket. For the more academically oriented, Portfolio Management Theory shows that classes that are not correlated effectively cushion against downside market risk. Combining stocks with hard assets significantly reduces portfolio volatility during systemic inflation.
Narrow Strait, Broad Options
Strait of Hormuz is narrow, but your options are broad. Diversity, like innovation, is the mother of necessity. A more connected world hurts but also balms.
Just as India is diversifying its sourcing of oil, gas, and other petro products, investors need to diversify their bets. Compounding works when combined with smarter and alternative investment options. Today's long-term is made up of many short-terms.
Stocks, bonds, gold, silver, real estate, insurance, and more need to be blended to build a more resilient portfolio. Sometimes you need to bet not just on a product or commodity; you might even need to bet on a country. India is a consumption-driven economy, the fastest-growing large one, and hence is a stable bet. But lots of action, aka wealth building, is happening away from what the Indian market offers. Indians consume lots of chips -the edible ones- while the world is hungry for silicon chips. You need to go global.
Like the crew of Odysseus, you need to manage and overcome the many hurdles on your journey to build long-term wealth.
Just as Odysseus guided his crew to safety and reached Ithaca, Shriram Wealth's advisors will help you navigate the complex journey of wealth building while balancing risk, returns, and protection solutions.
