Reconstructing the portfolio

 I have received few messages from the old members of the group, specially.

They're asking for rationale regarding my shift to index fund and back to face on next Nifty and all market index funds.

I fully understand their concern because I have changed my advice and strategy over the years. But this is not unnatural and infact one must keep reviewing once owns stance and portfolio with the changing Times. 

10 to 15 years ago there was no total market fund and index funds were just being introduced with no clear direction from the AMCs.

The large and midcap funds were giving decent returns and the small caps were having a good run. 

On my personal front I was always preferring what are now called Flexicap  funds because the multicap fund had also not had a separate Avatar.

In fact 2018 when various funds were re-classified with not just the change of name but also the mandate.

This naturally disrupted lot of things and before we could say Jack Robinson COVID struck.

After covid there was a massive Bull run which gave astronomical returns across all funds and very soon the valuations became unrealistic.

The small cap and mid Cap fund managers started becoming scared because there were no stocks to buy.

In this entire turmoil which people saw as opportunity I observed that just sticking to 1 particular market cap was becoming very difficult ; as in a short time the scrips were moving from small to mid and mid to large caps. This was making selection of fund very difficult.

Therefore in an attempt to further automate the decision making of investment I decided on two strategies: 

1. Firstly to have one active and one passive fund in the market cap that we were investing. e.g. if you had a large cap fund then add a next Nifty index fund to it.

2.  Secondly instead of trying to catch the Nifty 50 or sensex 30 index fund aim to maximize the profits by investing in more active companies which were less volatile than the midcap and more active than the larger index which is Nifty 50, you can say taking the middle path. 

3. Thirdly I observed that over limited period Nifty 500 give an average return of all the large mid and small cap. And just about 2 years before Nifty total market index was formed which included over 766 top funds of the country. 

In my view this was the best fund which could impart stability to any portfolio without compromising on the returns or any AMC falling out. 

This is a calculated strategy which will work as long as your expectations are not unrealistic and you should not hesitate in making adjustments to the strategy as you move ahead.

You should not limit yourself to this group and take professional advise also whenever you feel unsatisfied with your portfolio. Always select the best advisor and pay the top dollar to get his advice.

But you should always remember to ask the rationale if the advisor suggest some radical changes.

What to do in this down market?

 What to do in this down market?

Quite a few of you on this group, maybe seeing a market falling like this for the first time and it may be unnerving you and some of you may have started thinking if you have done the right thing .

Today I must say that this has happened so many times before not only for a day or week, but even for months together . 

So naturally to a new investor the most automatic question which comes to mind is what to do in this type of market situation. 

Usually, there are three types of actions which a person wants to do, and depending upon what kind of a person we are, which means that the action is actually in the mind much before we even take it.

To a very new investor who gets unnerved- the most natural reaction is to sell and run because he thinks that he has come to the wrong place and this is not his fault and the FD or maybe even the saving the account is much better.

To the second analogy, more experienced investor the thought comes that let me sell and wait to buy again at a lower level .

A third type of investor who still has money will like to put all at once to take the advantage of the situation.

But an even more seasoned investor will start making bulk purchases, but in steps and in addition to the SIPon STP that are undergoing . This is of course, the most equanimous  situation.

It’s A no-brainer that the last situation, obviously the best . 

In addition to this, then maybe other people like me who have been invested fully and have nothing more to invest. Such people would be like yogis who just sit  still and either watch things happening or don’t watch them at all but definitely don’t do anything at all. THIS IS CERTAINLY THE MOST DIFFICULT THING TO DO, BUT IT IS WHAT SHOULD BE DONE. 

But there are other things that a person can do as a investor apart from simply investing more or not investing at all..

1. They should review each and every Fund of their portfolio by opening out the list of all funds from Value research and checking how much their fund has lost in the last three months. They should go to a longer history and see how the fun has performed at different times like during the last election or the two lockdowns or in 2022 .

comparison with other funds and checking out the weather performance who have kept themselves in the top 25% will give them a fair idea of what is the nature and capacity of their fund and the fund managers.

2. They can also compare their funds with the index funds and the ETF funds of the same category and the benchmark. This will provide them with a self-made Plan for future.

3. We should check the performance of all the star funds and their managers which they had been listening to in the last two or three years like those of Quant , canara robecco, Motilal, and the others.

4. Lastly, the above observations will provide them with food for thought whether it should exit their star fund to move with the more seasoned and vanilla type performances or should they give more proportionality for their existing funds.

I GET LOT OF MESSAGES EVERY DAY ASKING ABOUT EVALUATING THE PORTFOLIO OR ASKING ME TO APPROVE THEIR FUND FOR INVESTMENT OR ANY OTHER ADVICE REGARDING FINANCE. but I am happy to say that this time even with the market falling somewhat no one has actually come with the question if they should sell most of them in fact, I’ve asked if they can go for bulk purchase purchases..

This is a sign of great maturity of the members of this group and I must commend group for that.

As you may have read so many books on finance, (which, fortunately I have not), you may have come across the famous words  That-  be  greedy when others are fearful.

So this is the time to apply that saying, however there is something weird that is happening this time and that is the people are not fearful at all.

Almost every day the mutual funds are making buys in 3 to 4000 crores.

This is again the immense faith of the people in the markets.

So Godspeed, all of you and a very happy Makar Sakranti Pongal and happy kite flying.