Should growth be the only aim of an investment strategy? Can capital protection be a good strategy to aim for? I would say yes to the latter.
Recently, an HNI family met me and shared their portfolio.
The family has worked hard over years. They built various businesses, saved, invested and grew wealth.
Today, there financial portfolio is worth close to Rs. 25 crores, across equity mutual funds, debt mutual funds, bonds and insurance.
They did not need the money for any specific purpose. They had other cash flows to take care of the same. It was their hard earned money and they wanted it to grow over time, steadily, gradually.
They showed me the portfolio. While their goal was clear the strategy was too complex. Here are some observations.
#1 Lots of schemes in the portfolio.
When I asked they said that the portfolio was ‘trimmed down’ to half of what it the number was. The more money you have to invest doesn’t mean you have to add more schemes to the portfolio.
It only adds to the accounting headaches.
#2 Constant STP running in several funds.
They had never analysed if the STP strategy made sense or was the right thing to do in the portfolio. But financial media and TV pundits convinced them. But they said peace of mind is more important than a couple of %ages of higher return. Fair enough.
#3 Capital protection was top of their mind.
An important aspect that came out was that they were not willing to take on lot of volatility. Capital Protection first, then growth – was their preference. Even if the portfolio could grow by 10% year on year, it would be fine with them.
This was their back up in case any of their businesses failed or they wanted to start something new.
That’s an important point and I really appreciate it.
Growth is not the only purpose of investments. You can aim for capital protection too.
How are they doing it?
They tried to do it a lot by themselves first. They learnt from wherever possible and then invested. But they have full time businesses to take care of.
Lack of time is driving them nuts. They need someone to look at their portfolio and give them unbiased fee based advice.
Thankfully they are not talking to their Bank for advice.
They are searching around. They are going to hear a lot of smart sales talk. I wish they see through and hire the right person.
What are you doing? What are you aiming your investments towards?