There is so much happening in the world – inflation, rising interest rates, wars, more inflation, etc. While uncertainty is part of the deal for the investor, we still want to try and make sense of it. We need the right references and models.
To know how can we take advantage or more importantly, prevent any serious damage.
Well, frankly speaking, there are no perfect ways to do it. But some models can still help us make sense of the chaos.
As of June 1, 2022, the Unovest Asset Allocation / market indicator looks like this. Here’s the link to the webpage.
The market doesn't seem to be sure about going up or down. But as investors, we know what to do at this stage.
Keep investing as per your asset allocation. Ideally, stick to 50% equity for now.
An experiment with asset allocation
If you had invested money - Rs. 10,000 monthly - in the Nifty 500 TRI index from April 1, 2009 to April 1, 2022. Your CAGR on this investment over 13 years will be almost 17%.
However, if you practised asset allocation (with the Asset Allocation cum Market Indicator) and yearly rebalancing, your CAGR would still be close to 17% but with much lesser volatility (less than half of Nifty 500). This suggests better risk adjusted returns or less portfolio suffering.
Mind you the fund in asset allocation is a Nifty 50 (large cap) and a Gilt Fund against the Nifty 500 (~ total market).
What would you prefer?
If you want to learn more about the asset allocation experiment, please do write back.
A simple portfolio of nifty index fund is fine for equity side. For debt side, which category of fund is to be considered. Liquid/money market/gilt?
On debt, the safest ones, need not be a debt fund. could be bank FDs, Govt bonds (listed), etc.
We would like to know what do you suggest for debt portfolio? Are liquid funds good ?
The framework is to look for safety, liquidity and returns in that order. Liquid funds are good for very short term parking of surplus. PPF and Bank FDs or RBI bonds are great too.
Mutual funds are regulated by governmental bodies and are required to publish information including performance, comparison of performance to benchmarks, fees charged, and securities held. A single mutual fund may have several share classes by which larger investors pay lower fees.