Last Updated on December 29, 2021 at 6:12 pm
This is an update of my retirement portfolio. After almost 13 years of investing in equity, it took a crash and a disproportionate recovery to increase my equity allocation significantly for the first time. So I reset the equity allocation from 65% to 60%. The intention behind these articles is to emphasise the reality that goal-based portfolio management is more important than fund or stock selection.
While these articles may or may not be beneficial to the reader, it certainly holds me accountable to my choices and removes uncertainty. Documenting my portfolio audits each year has helped reduce portfolio clutter. Reducing equity exposure by 5% may not be a big deal to someone who started investing in equity from day one. Still, for some who has been chasing their target asset allocation for years, this is a significant landmark.
I started investing in NPS in Aug 2006 (technically, earning 8% a year with my employer and only deployed into NPS in March 2010). The NPS contribution was higher than the amount I could invest after expenses for several years. This naturally increased the debt allocation. To make things worse, I had two PPFs running (mine and my wife’s) but thankfully did not have enough to invest.
So when I started my equity investing journey with a SIP of Rs. 1500 on 19th June 2008, it was an uphill task to increase my equity allocation. By 2010-11 by retirement planning was in place with DIY Excel sheets, and I decided on a 60% equity allocation target.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
For the first five years, from mid-2008 to mid-2013, the gains from equity was zero (they do not tell these realities when they show those nice compounding graphs, do they? They want to give you hope). So forget about increasing the equity allocation much. The bull run in 2013-14 and a continuous increase in investments helped but, my equity allocation was 55% in 2015.
From then, it was an excruciatingly slow climb up. It seemed to be stuck at 58% forever, and the March 2020 crash made things worse. By May 2020, the allocation dropped to 53.5% and the XIRR after 12 years a grand 2.75% (again the power of “compounding” at work). For new readers who cannot make sense of the sarcasm, please refer to, “don’t get fooled: Mutual funds have no compounding benefit!”
Then came the recovery. From 53.5% in May 2020, the equity allocation shot up to 63% in Dec 2020 and 65% in April 2021 (additional investments into equity MFs and direct equity also played a role). I was in two minds about rebalancing in December, but it was time to act with the recovery losing momentum.
This is the current allocation:
Equity: 60.2%
- Equity MFs: 49.6%
- PPFAS LTE: 23.3%
- HDFC Hybrid Equity: 14.7%
- Quantum Long Term Equity: 11.6%
- Direct Equity: 10.6%
Debt: 39.8%
- NPS: 28.8%
- PPF*: 7.1%
- ICICI Gilt Fund: 3.8%
* The PPF allocation is approximate as I have not updated my account for ages (can’t do it online due to SBI id issues)
Returns:
- Equity: 15.68% (XIRR. notice the wild swing from 2.75%)
- NPS: 9.8% (XIRR)
- Direct Equity: 21.4% abs gain. CAGR computed from this is 22.4%. See: Retirement Stock Portfolio Update April 2021
- ICIC Gilt fund is just a few days old!
- PPF: 7.5% should be a reasonable guess? Both PPF accounts will mature in April 2022. Seriously debating if I should extend or take out the money and start afresh (since I have the time).
Rebalancing details
The 5% equity has gone into both our PPF accounts (maximised for the first time). I have done this for my son’s portfolio four times (including April 2021). Also, see: This useful feature of PPF deserves more attention!
Why ICICI Gilt fund?
- I wanted a debt fund for the long term.
- A category that has a chance of beating liquid or money market funds
- minimal credit risk
- Full liquidity. No lock-ins. Hate lock-ins.
- My investment tenue is open (I can use this even after retirement)
- I did not mind active duration calls instead of 10Y constant maturity funds. This will relatively lower volatility and possibly enhance reward from time to time.
- Since I was already investing in ICICI gilt for my son’s portfolio, the choice was easier. This investment is made in a separate folio for tracking.
- For a review of the ICICI Gilt fund, see: Why I partially switched from ICICI Multi-Asset Fund to ICICI Gilt Fund.
- Please note ICICI Gilt fund aggressively changes bond duration. This means the NAV will be volatile (like any other gilt fund). I have 11+ experience of volatile NPS NAVs (including a rare bond crash), and so it was not a difficult choice for me.
- Please do your own research before investing. If you expect gilt funds to beat PPF every year or every other year, you will be sorely disappointed.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! You can watch podcast episodes on the OfSpin Media Friends YouTube Channel. 🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
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.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available! Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)