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POSTED BY ON May 16, 2013 8:02 pm COMMENTS (3)
dear experts,
Please shadow us on portfolio diversification. If an 30 yrs healthy person has to diversify the investments for a long term goal of above 10 yrs., how to proceed (insurance and emergency fund part is taken care off).
I am wondering if only Equity funds (Large and Mid Cap) along with PPF (considering Debt fund) will cover the whole investment part in ratio of 70:30 to begin. Rebalancing can be done as per age/risk appetite. My 1st thought – Is it really required to have Balance fund and Liquid fund in the portfolio just to diversify though we know that since the duration is more than 8-10 yrs, equity will beat all other funds. My 2nd thought – What if the equity market is down for considerable amount of time 1-2-3 yrs….how much it would impact the overall investment/return. Is that still we can acheive the goal or rebalancing is required to move the equity funds into Balanced/liquid funds?
Also, how many funds one should take under 1 cap (equity/balanced/liquid)…2,3 or 4.
What are your take on this? kindly put down.
regards
debojyoti
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PPF is not the optimal way to use debt. Why?
1. Since you cannot rebalance from it.
2. You cannot rebalance into it beyond a certain limit.
3. Putting money into and out of it cannot be done as easily as with a debt fund.
4. if 70% is a decent value for you; you can even use a equity-oriented balanced fund and let it do it in-built with tax savings too. (the tax on debt funds will be spared).
5. Use minimum number of funds.
Thank you Ashal as always for your prompt response. You have a very clear yet very simple thoughts……as you rightly said, the equity exposure can be increased considering the time frame…and STP to Debt fund can be followed before the desired time frame (2-3 yrs) or once the goal is met.
Thanks!!!
Dear Debo, I w’d like to have maximum amount possible in Eq. & minimum in PPF for myself. This ratio may change for you or anybody else. At the end of the day, whatever ratio, you are comfortable with, opt one. Do not worry for 2-3Y downturn. Yes if you are already having your target return in 6-7Y, you can switch to debt funds to protect your amount.
There is no fix generalised rule to invest in only 2-3-4-6-8 funds. Yes less is better than more. 🙂
Thanks
Ashal