Seeking feedback on my portfolio strategy

Personal finance
1

Hi everyone,

I’m currently building a portfolio for myself and have decided on a 50-50 asset allocation. For the equity portion, I’ve chosen the Edelweiss Nifty Large and Midcap 250 scheme, and for the debt portion, I’m opting for Fixed deposits.

My investment horizon is over 10 years, and my risk appetite is low. I’d love to get your thoughts on this approach. Could you please share the pros and cons of this strategy?

Looking forward to hearing your feedback, thanks,

2

excellent choice. try also recurring deposit. people will say about tax etc but u have options. Upto the tax exemptions limit load on to FDs and sign a 15G form. TDS will not be deducted. Upto 5 Lacks most of the listed private and small banks are covered. Spread it out. The big banks are not giving higher deposit rates

3

What all types of risks have you thought of?
Flexible with any of these risks?

24 Types of Risks
  1. Losing money – The possibility of permanent loss is the main form of risk.
  2. Falling short – Not having to make necessary payouts or income to live on.
  3. Missing opportunities – Not taking enough risk.
  4. FOMO (Fear of Missing Out) – Jumping on the bandwagon of risky investments for fear of living with envy.
  5. Credit – The risk that a borrower will be unable to pay interest and repay principal as scheduled.
  6. Illiquidity – The inability to sell when you need the money.
  7. Concentration – The risk of not being diversified when sectors drop in value.
  8. Leverage – Losses are magnified when investments decline in value by using borrowed money.
  9. Funding – The need to make a capital call when a loan comes due.
  10. Manager – The risk of picking the wrong one.
  11. Overdiversification – The standards of inclusion may drop leading to the potential of lower risk-adjusted returns.
  12. Volatility – This introduces an emotional component that may result in a permanent loss from selling too soon.
  13. Basis – This applies to arbitrageurs who go long one security and short another based on one being cheaper than the other and common patterns repeating themselves and yet something goes awry where the relationship breaks.
  14. Model – Excessive belief in a model’s efficacy can lead to excessive risk taking.
  15. Black Swan – Just because something hasn’t happened doesn’t mean it won’t happen. This is the statistically inconceivable event that materializes.
  16. Career – If rewards are shared asymmetrically then it may not be in a money manager’s best interest to take risks where there could be short term pain, but long-term pain for fear of losing clients or his or her job.
  17. Headline – This is when losses are big enough that they can potentially generate media attention.
  18. Event – Tends to apply to bondholders when the equity owners leverage up the company and put the bonds at more risk.
  19. Fundamental – Assets or companies underperform in the real world.
  20. Valuation – Overpaying for an investment.
  21. Correlation – Being less diversified than expected. Everything goes down much to the surprise of an investor.
  22. Interest Rate – The risk that higher rates can lower the value of fixed income securities and other yield-oriented investments.
  23. Purchasing Power – The risk that cash received in the future will be eroded in value due to inflation.
  24. Upside – The risk of being under-exposed to very good economic and financial events that occur in the future.

Source : Howard Mark’s “Risk Revisited Again” memo .

By this, are you saying that
you are OK to invest in something today
and NOT need it, no matter what, for the next 10 years atleast?

If yes, maybe you can take on liquidity-risk for 10years,
i.e. invest in an illiquid asset that is guaranteed to provide returns in around ~10years (and beyond) and likely receive higher returns than investing in a liquid asset for the entire duration.
For example an illiquid GSEC (compared to a liquid FD).

Also, maybe consider investing in more than just 2 assets
to avoid concentrating risk into only 2 schemes/markets.
(not saying should invest in 20, but maybe not just 2 either :thinking:)

4

Choose two fund houses in equity for extra caution.
For debt part based on tax bracket consider RBI Floating Rate Savings Bonds or AAA rated bonds for lower tax bracket else Gilt funds for simplicity.
Consider risking a small part in NCDs too if you want to boost returns. Post tax returns are important, do the math before investing!
If you want to dig deeper google “Investment Policy Statement morningstar”, sounds off putting term but makes good read (Read below article it helps)
https://www.morningstar.com/personal-finance/how-create-an-investment-policy-statement
Search for Christine Benz bucket strategy also since you are building portfolio.

1 Like
5

I am sure you have considered possible taxation on rebalancing as well as quarterly taxes on Interest on deposit.

What is your rebalance frequency? For FDs to minimize impact of change in interest rate and allow rebalance, have you thought of some sort of laddering scheme?

If you are looking for 10 years, are you open for Gold allocation?

you can have 40:40:20 or 35:35:30 allocation for equity:deposit:gold. It will reduce volatility of your portfolio and in long term may actually improve returns. This option also goes well with your risk profile.