Thread by @IamMisterBond

Lot of #AMCs come up with different ideas, themes, sectors.

These are demands from #Investors as they have done well in recent past.

AMCs are manufacturers & will offer what is in demand.

Final choice to say YES or NO lies entirely with Investors based on their #NEEDs

What should investors choose and what should they ignore. A point by point guide on where and why to invest in certain #themes, #MarketCap bias, #Sectors, #AssetClasses etc.

What should be criteria for these selections and what should guide them to resist from Investing?

Lets start with #Debt:

Keep enough money as 1 year of your expenses as #EmergencyFunds in #LiquidSchemes

You already have enough exposure to debt as:

1. #PPF
2. #TaxFreeBonds
3. #FDs

No need for separate debt allocation if you are investing thru #AssetAllocation (AA) or #DAAF

If you invest in Debt, you will need to ride risks of 1) #InterestRate 2) #Liquidity 3) #Credit 4) #Reinvestment

Debt should cushion your portfolios during volatility & not add to it. Treat it as temporary parking vehicle to be deployed in Equity at cheaper valuations thru AA

#Gold

Though I don't treat it as an investment, it is a social compulsion in Indian context for jewelery etc at times of marriage

Start SIP in Gold as soon as your child is born.Exposure of at least 10% of your portfolio. Will also work as hedge like in current uncertain times

#GlobalEquities
became flavors of the season till recent past due to US markets doing well since 2008-09 financial crisis. Investors are flocking to this looking at past performances.

Good #Geographical and #Currency diversification if done within limits of 10-20% of portfolio

Many investors had invested in #Nasdaq, #HangSeng, #China dedicated funds looking at #PastPerformances, only to burn their fingers.

Ideal is to allocate to schemes like @ICICIPruMF Global FoF which will decide which Country, Currency etc to invest, when and how much

#Equity:

Great tool for long term #WealthCreation if invested at right #Valuations. Otherwise can become wealth destructor as well if invested at expensive valuations.

70-80% portfolios always in Equity thru DAAF or #AssetAllocation (AA) with an eye on #DownsideProtection

Within Equity:

#LargeCap - gives more stability to #Portfolio vs Mid or Small Caps.
50-60% in Large Cap
20-30% in #MidCap (future Large Caps)
10-20% in #SmallCap (future mid caps)

You must know when to exit when markets become expensive. Otherwise, #Volatility in Mid and Small Caps will frustrate you.

Remember:
Rs. 100 lacs invested in NIFTY Small Cap 100 on 1st Jan 2018 had crashed to Rs.36 lacs on 23rd Mar 2020. Many exited at these levels

Ideal #solution in Equity:

Leave market cap bias to #FundManagers (FMs) to decide thru a mix of #FlexiCap and #MultiCaps. They will be more nimble footed during volatile periods and increase/decrease market Cap allocations accordingly

#Sectoral/ #Thematic Funds:

A big NO for me. Unless I am capable of knowing when these sectors/themes will go out of flavour and when I should exit, these are tactical calls which should be best left to FMs thru their respective Equity Fund offerings

Recent examples of Sectors being in flavor and going out of flavor soon thereafter:

#DiagnosticLabs during #COVID period.

Something similar had happened to #Infra sector during 2006-07 infra boom and bust

#TechBubble of 1999-2000

Investors needed to be nimble footed in exits

#IPOs of #Shares:

Retail investors in general are incapable of analyzing a new IPO.

I have personally never invested in IPOs.

Many times these are #OFS giving exit to old investors and new investors invest at expensive valuations.

All are aware of outcomes of recent IPOs

Better once again is to trust professional managers for this. @EdelweissMF has a scheme which analyses IPOs and invests in them (even as early investors before the IPO). This should give comfort to investors of both analysis of the IPOs and allocations

Hope above guides investors to create their own discipline in their Investment process.

If you create a list of where not to invest ever, 50% of your job will be done with much better outcomes.

Rest is noise that should be ignored. Otherwise, it can only derail you