I shared my investment strategy with readers in December 2020. I expected 2021 to be one of the most difficult years for investors in terms of high volatility, poor expected returns from diversified portfolios and continued low return expectations from cash and debt. After 3months into the year, I am even more confident about my view.
I continue to believe that to generate normal return on the
financial asset portfolio one would need to maintain a certain degree of
flexibility in portfolio. A part of the portfolio may be dedicated to active
trading, at least in 1HFY22. I am therefore not changing my investment strategy
for next 6months at least.
I may share my current investment strategy as follows:
Asset allocation
I shall continue to maintain high flexibility in my portfolio,
by keeping 30% of my portfolio as floating, while maintaining an UW stance of
equity and debt.
Large floating allocation implies that I shall be trading
actively in equity.
(a) The fixed equity
allocation would be 40% against 60% standard.
(b) The fixed debt
investment would be 20% against 30% standard.
(c) I would park 10%
in cash/money market funds.
(d) 30% of portfolio
would be used for active trading in equities and debt instruments.
My target return for overall financial asset portfolio for FY22
would be ~7 to 7.5%.
Equity investment strategy
I would continue to focus on a mix of large and mid cap stocks.
The criteria for large cap stocks would be growth in earnings; while for
midcaps it will be mix of solvency & profitability ratios and operating
leverage.
(a) Target 6% price
appreciation from my equity portfolio;
(b) I shall be
overweight on IT, Insurance, Healthcare, Agri input and large Realty stocks. I
shall maintain my underweight stance on lenders for at least 1HFY22.
(c) For trading I
will focus on large cap liquid stocks.
Miscellaneous
I have assumed a relatively stable INR (Average around
INR74/USD) and slightly higher short term rates in investment decisions. Any
change in these assumptions may lead to change in strategy midway.
I would have preferred to invest in Bitcoin, but I am not
considering it in my investment strategy due to inconvenience and unease of
investing.
Factor that may require urgent change in strategy
·
Material rise in inflation
· Material
change in lending rates
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