OK - I won't write a lot, but just some thoughts and recent realizations, and how they're shaping my portfolio and future investment strategy - and of course, this is also my way to journal the decisions I take so that I can come back and learn from mistakes I may be doing now :)
Here we go!
1) My time is very precious, and perhaps for good, I'd spend little time I get from unavoidable things to spend with my little baby - it is more satisfying than the feeling of identifying a good investment opportunity.
2) Instead of spending time, I'd spend a small amount as fees for professional investment management - OK, I'm not talking about any hi-fi stuff - all I mean is that I'll invest in equities by means of Mutual Fund SIPs and no more direct stocks, unless I'm comfortable analyzing businesses and get sufficient time to do so. In fact, if I get time, I'll spend that to read good books first and not on business analysis. I realize that there's a long way for me to go in terms of learning and reading about Value Investing and putting those ideas into practice.
3) Unless someone very well knows fixed income investing, they should forget Fixed Deposits or Debt Funds or direct Bonds as a mode of investment with an aim for income generation. At the best, in any economy, fixed deposits from banks can act as capital preservation - they don't really generate any income - after we account for the very important concept of Inflation.
4) I was earlier invested in 6-7 different mutual funds, but I realized it was unnecessary and I've now trimmed them to just 4 - with clear focus and rationale, as I list below
- Franklin Templeton Prima Plus Fund for Large Cap allocation - this is to provide a stable core for my equity portfolio. I chose this based on Morningstar rating
- HDFC Midcap Opportunities Fund & ICICI Prudential Value Discovery Fund for aggressive growth orientation for the portfolio - given my risk capacity, I can afford to have a healthy proportion of mid-caps - of course, quality mid-caps and this approach should generate good long term return for my portfolio - my expectation is 12% or higher annual return on the overall equity portfolio in next 15 to 20 years
- Even though it is a relatively new fund, I've strong respect and trust in Mr. Parag Parekh's skill and inheritance and I hope PPFAS fund house will deliver to its promises in next 10 to 15 years. This is the fourth and final fund in my portfolio
5) I still hold a small amount of direct stocks I purchased in 2013 - they're sitting at decent profits, but I believe in those stocks and I'm trying to monitor them and if need arises, I'll exit them in coming months, but so far, inaction prevails here.
6) I believe individual investors like me should utilize the Morningstar's Instant XRAY feature more and more and analyze portfolio once in 3 to 6 months using this superb tool. This doesn't take a lot of time but provides useful insight. I used it to rebalance my portfolio - I realized I was more large cap focussed when my aim was to be mid-cap heavy and hence I've reallocated part of large cap funds into mid cap funds. Perhaps the timing may not be right, but in the long run, such timing won't matter as long as fund selection is right and I continue to systematically invest and not bet lumpsum money at any point in time.
Finally, on fixed income - I suggest that everyone should very carefully analyze their need for emergency fund, surplus for unplanned expenses and surplus cash for potential investment opportunities in future, and simply keep this money in an avenue which provides very good safety of capital and a post-tax return that is at least as high as current inflation rate - this would be a simple yet prudent strategy to manage liquid part of one's portfolio. No need to worry about 60--40 or 75-25 rules - make sure you have a good cushion of liquidity before you commit to equity investments - after all - long term investing requires that we don't need to and don't urge to withdraw from our equity corpus when we earn via our jobs - for me, it is still a period of at least 25 years and I'm proud and confident that I've a good plan in place to develop and maintain a healthy equity portfolio and a cushion of liquidity and insurance as my financial plan. I'm being honest to not expect more than 12% growth rate on equity portion and to match inflation on liquid portion of this portfolio - as a final check, I tried to calculate my retirement capital that I expect to generate from such a portfolio and I'm happy it'd be large enough to provide me a monthly income post-retirement (through a Monthly Income Plan) whose Net Present Value is 4 times my current expenses - this income without having to draw any amount from the retirement corpus at all.
Thanks for reading through, but as a statuary disclaimer, please do not copy this plan as-is - use your mind and mold these guidelines to suit your individual requirements and situation. I'm thankful and pleased if you like this post and do plan to take away some of the things :)
Till then, Bye and I'll try to write soon - even if I'm inactive as far as financial plan and investment actions are concerned :)
Happy Investing!
