[adimicra]

Originally Posted by SoumenD

Yeah, that's what I am planning to do now. A market correction seems around the corner with current valuation. Just waiting for some sign of the same(i.e. 2-3 days of 3 figure reds) and I will exit the entire corpus invested in this fund. Till then trying to stay hungry(err greedy), stay foolish



That's why trying to piggyback the current rally as long as it stays. Normally when market crashes small caps are the ones with maximum losses and its vice versa for bull market. I am invested in Axis small cap as well and it isn't as bad a performer as this L&T small cap. Hence, planning to exit this once market correction starts. However will continue to be invested in the Axis one.

Originally Posted by SmartCat

Since many of you are invested in L&T Emerging Business fund, I just took a quick look. It is just a small cap fund with a fancy name. It has underperformed NIFTY, sure, but not the small cap index.

Attachment 2092997

And now that small caps have started moving after almost 3 years (index peaked in 2018), L&T Emerging Business fund too has started picking up pace.

Exiting this fund now is akin to:

- Waiting inside a stationary bus for 3 hours
- But just when the driver has started the bus and started moving, you are thinking about exiting the bus.

Exit the L&T Emerging Business fund now only if you believe smallcaps will crash again.

Factually, investing in small cap fund is actually useless for the long term unless you can time the market (which is not possible for normal people like me).

Please read this -
https://freefincal.com/large-cap-vs-...-vs-small-cap/

My advice - get rid of this fund like a bad habit.
Depending on your risk profile and current holdings, I would advise using a Nifty next index fund or a combination of Nifty next index fund + Midcap fund (DSP/Axis/Invesco). This is with the assumption that you already have a Nifty Index fund or Aggressive Hybrid fund in your core portfolio.

No need to overcomplicate your investments, most of us including myself try to be overthink, which lead to more mistakes and poor returns in the long term.

[somspaple]

I have following two SIPs that are showing 14% annualized return. This is the highest number I've seen in probably 6+ years. Do you think it's good to redeem them now? I'll be investing the redeemed cash back in to mutual funds. If yes, what other fund (SIP) can I buy? Or is it better to hold/continue the switch. This is for a long term investment.

SBI Bluechip Fund (This is a monthly switch from below fund)
SBI Long Term Equity Fund (matured few years back and I've stopped SIPs on this. There is another ELSS running.)

Apart from the above, planning to start another small SIP in index fund - ETF Nifty 50. Any other suggestions?

TIA

[mankuthimma]

Originally Posted by SmartCat

50:50 between equity and debt is the simplest strategy. For better results, disable SIP and make investments once a month manually. Invest in an asset that has lower value (weightage) at the time of investing.

Originally Posted by SmartCat

if you want to be strategic about your debt investment, opt for g-sec funds.

Originally Posted by adimicra

Depending on your risk profile and current holdings, I would advise using a Nifty next index fund or a combination of Nifty next index fund + Midcap fund (DSP/Axis/Invesco). This is with the assumption that you already have a Nifty Index fund or Aggressive Hybrid fund in your core portfolio.

No need to overcomplicate your investments, most of us including myself try to be overthink, which lead to more mistakes and poor returns in the long term.

First of all, thank you so much for such wonderful insights!! There are always new things to learn especially when it comes from personal experiences which makes it even more valuable!

I already have an existing portfolio, although not ideal or disciplined by any means. Returns are okish but not great. I was wondering how to adopt these new learnings going forward.

In equity, I have one fund each for large cap, mid cap, small cap and diversified. In debt, I have FDs, PPF, a short term and a medium term debt funds. Some of these funds are quite old and lost flavor in recent times, but the ratios have become lopsided over time tilting more towards the debt category. Within equity too, the ratio is more towards Large caps.

I am thinking of rebalancing using passive investing and g-sec funds to keep things simple and straightforward henceforth.

Instead of meddling with existing investments, does it make sense to retain the existing portfolio as is and create a new portfolio for fresh monthly investments with the following objectives :

- bring back 50:50 equity:debt balance by adding
- 1 or 2 index funds to maintain 50% of equity ratio going forward
- g-sec funds to maintain the 50% debt ratio when needed

Since adding index funds will create overlap with existing funds, is that fine in the long term or any other approach to rebalance the equity portfolio?

[graaja]

Originally Posted by mankuthimma

Instead of meddling with existing investments, does it make sense to retain the existing portfolio as is and create a new portfolio for fresh monthly investments with the following objectives :...

Even though you may create a new portfolio, the money in the old holdings is still your money and in the end, your final asset class split will be based on the old holdings as well.

My suggestion: Decide your overall strategy, choose your funds for the split, and re-balance. Even if this requires exiting the existing investments and re-investing based on the new strategy. If some of your existing investments are doing well, but you do not want to invest any fresh amount, that is fine. Keep those investments, but include it in your final re-balancing equation.

This is what I did an year back after first reading about portfolio re-balancing from SmartCat, and I am glad I did that.

[mankuthimma]

Originally Posted by graaja

This is what I did an year back after first reading about portfolio re-balancing from SmartCat, and I am glad I did that.

Great ! Thanks! Then I can get some practical tips on how to go about doing this step by step

Yes, I will be considering the existing investments as well for calculating the overall 50:50 ratio. My confusion is do I have to attempt clean up of existing equity portfolio first or should I add index funds to bridge the gap and go towards 50% ratio.

Does adding index funds to augment existing portfolio works better or replacing the existing funds (some of them, lets say, existing midcap or smallcap) with an appropriate index fund works better ?

Touching the existing investments means redeem, park it in some liquid fund and use it to gradually invest in the new fund. Also need to handle the tax implications. Since I used to invest directly with AMCs, this also could pose logistical issues transferring money from one fund to another. I already have a Zerodha account, I am thinking of using its Coin platform going forward.

[SmartCat]

Originally Posted by mankuthimma

In equity, I have one fund each for large cap, mid cap, small cap and diversified. In debt, I have FDs, PPF, a short term and a medium term debt funds.

Here, categorize FDs & PPF under 'debt' too. And then calculate your equity/debt percentage (using current value, not invested value).

I am thinking of rebalancing using passive investing and g-sec funds to keep things simple and straightforward henceforth. Since adding index funds will create overlap with existing funds, is that fine in the long term or any other approach to rebalance the equity portfolio?

If you don't want to rock the boat too much, rebalance using fresh investments only. Eg:

- If current value of equities is 63% and current value of debt holdings is 37%, put all your incremental monthly savings into g-sec funds - till equity/debt balance is close to 50/50.

- If current value of equities is 63% and debt is 37%, but then, if there is a deep correction in Jan 2021, then the current value of your equity holding might be 47% and debt might be at 53%. If that's the case, invest in equity funds till 50/50 balance is reached. This way, you will always buy stocks when it is falling (getting cheaper), and NOT buy when stocks are expensive (rising)

[mankuthimma]

Originally Posted by SmartCat

If you don't want to rock the boat too much, rebalance using fresh investments only.

Thanks! Now it is even more clear with the example you provided !

Originally Posted by SmartCat

- If current value of equities is 63% and debt is 37%, but then, if there is a deep correction in Jan 2021, then the current value of your equity holding might be 47% and debt might be at 53%. If that's the case, invest in equity funds till 50/50 balance is reached. This way, you will always buy stocks when it is falling (getting cheaper), and NOT buy when stocks are expensive (rising)

Actually, my situation is other way around, say 37% in equity and 63% in debt. So for now, the equity proportion. has to do the catchup. But looking at the current market, wondering it is better to start this process from Jan once the year end correction takes place.

Also I hear conflicting opinions about passive investing - some say its good to have combination of active and passive funds and few say passive investing works only when everything is passive, otherwise its just duplicating things. Also, currently, its the govt institutions like LIC, PF that are favoring index funds for their equity investments, due to which they have gained prominence.
What are your thoughts??

[SmartCat]

Originally Posted by mankuthimma

Also I hear conflicting opinions about passive investing - some say its good to have combination of active and passive funds and few say passive investing works only when everything is passive, otherwise its just duplicating things. Also, currently, its the govt institutions like LIC, PF that are favoring index funds for their equity investments, due to which they have gained prominence. What are your thoughts??

Multi-page debate on active vs passive funds:
https://www.team-bhp.com/forum/shift...ml#post4758027 (The Mutual Funds Thread)

[rageshgr]

Originally Posted by mankuthimma

Actually, my situation is other way around, say 37% in equity and 63% in debt. So for now, the equity proportion. has to do the catchup. But looking at the current market, wondering it is better to start this process from Jan once the year end correction takes place.

Don't wait for any correction, carry on with your investments.

Originally Posted by mankuthimma

Also I hear conflicting opinions about passive investing - some say its good to have combination of active and passive funds and few say passive investing works only when everything is passive, otherwise its just duplicating things. Also, currently, its the govt institutions like LIC, PF that are favoring index funds for their equity investments, due to which they have gained prominence.
What are your thoughts??

Data over the years show that only 50% of the active mutual funds beat the index. so it is down to a coin toss, and retail investor experience will be even worse because they keep chasing the best active fund every year. If you want a low cost low maintenance equity participation and sure that you won't worry about out-performance and under-performance then go ahead and invest in a simple Nifty Index fund and probably 20% in Nifty Next 50 as part of your equity portfolio. But of-course, one needs to manage risk and vary asset-allocation as per goals as usual.

[SmartCat]

Originally Posted by mankuthimma

Actually, my situation is other way around, say 37% in equity and 63% in debt. So for now, the equity proportion. has to do the catchup. But looking at the current market, wondering it is better to start this process from Jan once the year end correction takes place.

40/60 equity/debt is a good conservative mix too. This portfolio will fall less than a 50/50 portfolio. So if you are uncomfortable adding on to equity positions now, just maintain 40/60 mix between equities and debt.

Here is a historical comparison between 40/60 and 50/50 stocks/bonds mix for US markets:
https://www.financialsamurai.com/his...io-weightings/

[vharihar]

I plan to invest one-shot lumpsum in some MFs in the ICICI Prudential family, primarily with a 4 year time horizon. I was thinking of the following funds:

1) 40% in ICICI Prudential Balanced Advantage Fund (categorized as hybrid equity fund), apparently it features daily or very frequent rebalancing.

2) 40% in ICICI Prudential Asset Allocator Fund (categorized as debt fund, I believe), apparently its a fund of funds and features approximately monthly rebalancing.

3) 20% in ICICI Prudential All Seasons Bond Fund (categorized as debt fund, I believe)

Any thoughts?

Markets are at an all time high nowadays, so was wondering if this is a good time to get in to #1 and #2 at all. But then their frequent rebalancing features allayed my fears a bit. That was my justification.

#3 mainly for some kind of low-risk, capital preserving investment. But there too, if interest rates rise (and one part of me says interest rates have almost bottomed out and going up from here is more likely), then the bond fund may not be a good idea perhaps? I don't know, am quite a novice especially related to bond funds and debt funds in general.

So any thoughts welcome!

[SmartCat]

Originally Posted by vharihar

20% in ICICI Prudential All Seasons Bond Fund (categorized as debt fund, I believe)

#3 mainly for some kind of low-risk, capital preserving investment. But there too, if interest rates rise (and one part of me says interest rates have almost bottomed out and going up from here is more likely), then the bond fund may not be a good idea perhaps? I don't know, am quite a novice especially related to bond funds and debt funds in general.

wow, this is a nice find - it has an impressive record. This is a "dynamic bond" fund. If the fund manager thinks interest rates will rise, he will exit long term bonds and buy short term securities.

Going by the "smoothness" of the NAV graph, looks like the fund manager is doing a good job of predicting interest rates.

[Simhi]

Originally Posted by SmartCat

wow, this is a nice find - it has an impressive record. This is a "dynamic bond" fund.

Note: Though the performance is good, the fund has around 40% investment in AA bonds. The manager, in my opinion, is taking too much risk. It is better to look for fund invested purely in SOV+ AAA/A1+ bonds then AA.

[Thebat]

Originally Posted by Simhi

Note: Though the performance is good, the fund has around 40% investment in AA bonds. The manager, in my opinion, is taking too much risk. It is better to look for fund invested purely in SOV+ AAA/A1+ bonds then AA.

AA rated instruments are not always bad. Names like TATA Steel, Bharti Airtel Telecom, TATA power, Mutooth etc are rated AA.

Having AA names the fund manager is confident on will give the fund a boost in performance and in this low interest regime we are currently in will help out in increasing the returns of our portfolios.

SOV is a no brainer we do not need a mutual fund or a fund manager to hold SOV rated instruments. A1+ is not always AAA and both are not the same. A1+ is the rating given for shorter term instruments and AAA for longer ones. TATA Steel as a example is rated A1+ for shorter tenure CP's and AA for longer tenure ones.

Invest wisely.

[SmartCat]

Originally Posted by Simhi

Note: Though the performance is good, the fund has around 40% investment in AA bonds. The manager, in my opinion, is taking too much risk. It is better to look for fund invested purely in SOV+ AAA/A1+ bonds then AA.

Originally Posted by Thebat

SOV is a no brainer we do not need a mutual fund or a fund manager to hold SOV rated instruments. A1+ is not always AAA and both are not the same. A1+ is the rating given for shorter term instruments and AAA for longer ones. TATA Steel as a example is rated A1+ for shorter tenure CP's and AA for longer tenure ones

Whoops, I did not notice the portfolio when I commented. So yes, the fund manager is taking risks to generate those impressive returns.

But AA+ rating is fine. It is the highest ratings for certain type of bonds, equivalent to AAA or A+. That's why SBI/ICICI Bank/Axis Bank bonds that are there in this fund's portfolio have AA+ ratings.