Asset Allocation!
An often misinterpreted word.
Attended an insightful Twitter spaces on:
Building a portfolio by right asset allocation with
@iRadhikaGupta, @monikahalan & Jainy Shah @PRIMESTARinves1 co-hosted by @avasthiniranjan
A thread 🧵 on key learnings:
An often misinterpreted word.
Attended an insightful Twitter spaces on:
Building a portfolio by right asset allocation with
@iRadhikaGupta, @monikahalan & Jainy Shah @PRIMESTARinves1 co-hosted by @avasthiniranjan
A thread 🧵 on key learnings:
What is asset allocation?
It's like diet of each individual.
The needs of:
~ Youngster
~ Middle age earner
~ Retired person
would vary. So will their diet & investments
Selecting investment products to meet one's need is asset allocation.
It's like diet of each individual.
The needs of:
~ Youngster
~ Middle age earner
~ Retired person
would vary. So will their diet & investments
Selecting investment products to meet one's need is asset allocation.
Basic of asset allocation
Similar to different kinds of food, there are different kinds of assets.
Every asset has a set of qualities.
Such as:
~ Risks
~ Returns
~ Time period
Understanding one's risk appetite is most important in choosing the assets in asset allocation!
Similar to different kinds of food, there are different kinds of assets.
Every asset has a set of qualities.
Such as:
~ Risks
~ Returns
~ Time period
Understanding one's risk appetite is most important in choosing the assets in asset allocation!
Basics forms of assets
~ Debt: Fixed deposit, PPF, Bonds
~ Equity: Mutual funds, Index funds, ETFs, smallcase, Direct stocks
~ Physical assets: Real estate & gold
Don't get confused by product names. Understand where the money is being invested!
~ Debt: Fixed deposit, PPF, Bonds
~ Equity: Mutual funds, Index funds, ETFs, smallcase, Direct stocks
~ Physical assets: Real estate & gold
Don't get confused by product names. Understand where the money is being invested!
Asset allocation myth about youngsters
"If you are young, have entire asset allocation in equity!"
However, if in a bear market you:
~ Need to redeem investments
OR
~ Suddenly need money e.g. for re-skilling
equity won't be sufficient.
Have a debt component when even if young!
"If you are young, have entire asset allocation in equity!"
However, if in a bear market you:
~ Need to redeem investments
OR
~ Suddenly need money e.g. for re-skilling
equity won't be sufficient.
Have a debt component when even if young!
Simple formula to decide upon Equity & debt allocation
~ Immediate goal (1-3 yrs): zero equity
~ Nearer goal (3-5yrs): more debt
~ Farther goal (5-10 yrs): more equity
~ Farthest goal (7-10 yrs): zero debt
~ Immediate goal (1-3 yrs): zero equity
~ Nearer goal (3-5yrs): more debt
~ Farther goal (5-10 yrs): more equity
~ Farthest goal (7-10 yrs): zero debt
Do market cycles, valuations matter in asset allocation?
Ideally allocate to equity during worst times of markets i.e. a crash or correction
However, make sure the investments are in line with your risk appetite!
Ideally allocate to equity during worst times of markets i.e. a crash or correction
However, make sure the investments are in line with your risk appetite!
How to understand your risk appetite?
Make a sample portfolio of some debt & equity allocation.
Check it's performance during worst market periods e.g. 2008 crash. Check your comfort!
The asset allocation, you feel comfortable most, is the suitable one!
Make a sample portfolio of some debt & equity allocation.
Check it's performance during worst market periods e.g. 2008 crash. Check your comfort!
The asset allocation, you feel comfortable most, is the suitable one!
Can emergency funds be kept in equity?
Emergency funds are not equity money!
The money should be easily available for emergencies!
Use one of the following options for emergency funds:
~ Liquid funds
~ Tax efficient arbitrage fund
~ Short term debt fund
Emergency funds are not equity money!
The money should be easily available for emergencies!
Use one of the following options for emergency funds:
~ Liquid funds
~ Tax efficient arbitrage fund
~ Short term debt fund
Is Real Estate (RE) good for asset allocation?
Issue with RE-
Ease of:
~ Buying
~ Maintaining
~ Selling & Exit
RE is area specific, with no platform available to find good deals.
When buying RE, look for yield that you will get.
Buying on loan with Yields of 3-3.5%, is loss!
Issue with RE-
Ease of:
~ Buying
~ Maintaining
~ Selling & Exit
RE is area specific, with no platform available to find good deals.
When buying RE, look for yield that you will get.
Buying on loan with Yields of 3-3.5%, is loss!
Advice for beginners on their equity investments
~ Consider an advisor
~ Start with basic e.g. diversified equity or index fund
~ Get used to volatility
~ Lose money a little
~ Know yourself
~ Don't buy on tips
~ Have a long term perspective
~ Consider an advisor
~ Start with basic e.g. diversified equity or index fund
~ Get used to volatility
~ Lose money a little
~ Know yourself
~ Don't buy on tips
~ Have a long term perspective
Why advisor is important?
~ Will help you avoid mistakes
~ Won't let you be misled & confused
~ Will keep you sane & centered in bad markets
If you find a trustworthy & good advisor be with him like having a friend!
~ Will help you avoid mistakes
~ Won't let you be misled & confused
~ Will keep you sane & centered in bad markets
If you find a trustworthy & good advisor be with him like having a friend!
Can you outsource investing completely to an advisor?
Only when you have built trust!
~ Find a reliable advisor within extended family & friends
~ Else discuss with 3-4 advisors
~ Check if they consider your goals & expectations
~ Beware those asking your corpus for investment!
Only when you have built trust!
~ Find a reliable advisor within extended family & friends
~ Else discuss with 3-4 advisors
~ Check if they consider your goals & expectations
~ Beware those asking your corpus for investment!
When to re-balance asset allocation?
~ As per changes in life situation
~ Goals are nearer
~ You have dependants or they have started earning
Review portfolio periodically with discipline.
~ As per changes in life situation
~ Goals are nearer
~ You have dependants or they have started earning
Review portfolio periodically with discipline.
Portfolio re-balancing in different market cycles.
In Bull markets:
Just like traders have STOP LOSS, have STOP PROFIT.
~ Book profits
~ Enjoy the money
~ Invest in safe assets e.g. debt funds
~ Re-invest when market corrects
In Bull markets:
Just like traders have STOP LOSS, have STOP PROFIT.
~ Book profits
~ Enjoy the money
~ Invest in safe assets e.g. debt funds
~ Re-invest when market corrects
Should you invest in NFOs?
~ NFOs are mostly noise.
~ Have more expense ratio
~ Have no track record
You will get same kind of fund, with a track record & at lesser expense ratio.
AMCs would launch NFOs for their expansion. Don't be compelled to buy!!
~ NFOs are mostly noise.
~ Have more expense ratio
~ Have no track record
You will get same kind of fund, with a track record & at lesser expense ratio.
AMCs would launch NFOs for their expansion. Don't be compelled to buy!!
Should you invest in international markets?
Only when you are experienced in domestic markets.
~ Knowing domestic markets & businesses is easier
~ Understanding global scenarios & foreign markets needs time
International exposure is important but not as a beginner!
Only when you are experienced in domestic markets.
~ Knowing domestic markets & businesses is easier
~ Understanding global scenarios & foreign markets needs time
International exposure is important but not as a beginner!
Summary/TL;DR
~ Asset allocation Varies as per needs
~ Allocate as per risk appetite
~ Debt allocation is important too
~ Allocate as per goals
~ Review & re-balance periodically
~ Avoid NFOs
~ International exposure only when experienced
~ Asset allocation Varies as per needs
~ Allocate as per risk appetite
~ Debt allocation is important too
~ Allocate as per goals
~ Review & re-balance periodically
~ Avoid NFOs
~ International exposure only when experienced
If you have liked the thread pls re-tweet the first tweet
👇👇
for the benefit of everyone!
👇👇
for the benefit of everyone!
https://twitter.com/Finalysis20/status/1426476192702484484?s=20
• • •
Missing some Tweet in this thread? You can try to
force a refresh
