Tag: portfolio

Periodically review your portfolio

Assessing and reviewing your portfolio is critical to be on top of your positions, While till today I have not found any structured way to go about it, What has helped me to think objectively is to focus on

  • status of key variable of business
  • risks identified
  • buying hypothesis – does it still hold good

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The next question is how often do you review ? 6 months, 12 months , 2 years ? Frankly there is no right answer – But I found 6-8 months is a good period to start with

Below is my simplistic review of two businesses in model portfolio – If would be foolish to buy … Read the rest

How much would you allocate to bonds ?

This is my third and final post on debt series, to read previous ones click here and here

In this last post on Debt investments, I would cover allocation or in Simple words – How much of the portfolio should be in invested in debt instruments

Situation 1 – I know I need to double my portfolio in 6 years after paying taxes so that I can meet my personal needs

Here you know the target return on investment, i.e. 12% pre-tax on a compounded basis to double your portfolios in 6 years. Now first one has to understand on an average historical basis  how much debt and equity has returned. In India if look at last ten years data

Debt has given approximately 9% pre-tax return that equates to post tax return of 7.2% ( Assuming you pay 20% income tax)

Equity has given approximately 14% post tax return

Based on above one has to invest 70% in equity and 30% in debt to achieve their goal of attaining 12% pre-tax compounding return

But should you get obsessed with past performance? Understand past is not a guarantee of future performance, however one has to start somewhere and the best … Read the rest

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