A reader says, “I am currently 37, married (no kids yet), based out of Bangalore and, as usual, a very late starter to equity investing. My debt portion (PPF, EPF, FDs) is much higher than equity, and all I am trying is to catch up and make debt to equity 50:50 and regularly rebalance once a year (as you have suggested in your multiple videos)”.
“I have been investing in Index Funds since 2020 in 3 funds: HDFC Index Fund Nifty 50 (Direct) – 68k per month, UTI Nifty Next 50 Index Fund (Direct) -10k per month, ICICI Prudential Nifty Midcap 150 Index Fund – 7k per month”
“I started an ICICI Prudential Bluechip fund before. I stopped after investing close to 60k a long time ago, and this is currently valued at 92k. I have not withdrawn it and have kept it as it is”.
“I know you have warned against Nifty Next 50 and Midcap 150 multiple times on your website/YouTube, but I could not stop myself (FOMO, I admit). Anyways all of them are positive currently and I have a total corpus ~35 lakhs. I intend to continue this and increase the SIP as my salary increases”.
“My question” I regularly see low volatility investing being talked about in mutual funds (YouTube) and how, among the four factors in index funds, low volatility index funds are the safest for a common man like me”.
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“I have watched some YouTube videos on this: Nifty 100 low volatility 30 index, and it seems to perform better in all scenarios compared to Nifty 50 and Nifty next 50”.
“Should I discontinue SIP (not withdraw) in at least two of the three funds, i.e. shift to a Nifty 100 low volatility 30 index fund and stop the Nifty 50 and Nifty Next 50 and combine the 78k into this single fund?”
“Is it worth the hassle? Is it a good way of decluttering my portfolio and moving to 1/2 equity funds at most with SIP? Or should I continue as it is? As you suggested, I want to continue with ‘peaceful investing’ as I have been doing for the last 4.5 years, and I would love to listen to your thoughts on this”.
Peaceful investing refers to focusing on the right priorities – having clear goals and goal targets, asset allocation targets, and aiming for conservative returns sufficient to attain our financial goals.
The choices of equity or fixed-income products are secondary. Active or passive investing is secondary. The market cap spread of the equity portfolio is secondary. Factor-based funds or broad market index funds are secondary.
FOMO is the enemy of peaceful investing. If we keep chasing every shiny investment idea, our portfolio will be messy. I think you should come to terms with the fact that some other product theme or idea will always be better than what we hold, and it is not practical to sample all the pies in a bakery simultaneously.
If active funds are subject to fund manager risk. Factor-based funds (and broad market passive funds) are subject to stock basket curation risks. The data we have on factor funds in India is extremely limited. So, it is incorrect to assume that low-volatility investing will always fare better than investing in the Nifty or Nifty Next 50. Everything is subject to ups and downs with unknown periodicity.
- Data Mining in Index Construction: Why Investors need to be cautious
- Why Nifty Midcap150 Quality 50 index performance is a warning for factor investing fans
Of course, you can invest in a low-volatility fund, but do so with the full understanding that it could start underperforming Nifty 50 anytime. In any case, aim for a large cap-oriented equity portfolio to reduce risks.
We believe the best course of action for you is to stick with your existing funds and focus on increasing investments, aligning your asset allocation with your target and leaving your portfolio on auto-pilot with a 30-minute review once a year. Staying away from personal finance content (including freefincal) will help you stay the course.
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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