Parekh has been allocating mixed funds (investing combinations of low-related assets), such as equity savings funds and multi-asset funds, as market valuations are expensive. His portfolio allocated Hybrid Fund allocation has risen to 34% from 26% last year, with Parekh sharing Guru Portfolio Series in his interaction with MINT. In this series, leaders in the financial services industry share how they manage their money.
Current Asset Allocation
As mentioned earlier, his exposure to hybrid funds is 34%. His exposure to Indian stocks is 34%. The exposure rate for international stocks is 13%; 12% is a debt fund and 7% is gold. Gold distribution is allocated 45% of sovereign gold bonds and gold mining funds allocated 55%. The latter invested in the stock of gold mining companies. Gold mining stocks usually rise 1.3 to 1.5 times the price of gold. But Parekh warned that gold mining funds are not suitable for everyone because when gold prices fall, it tends to be more volatile”.
Parekh has been cautious about the stock market, but has gradually increased its stock in recent market corrections. He has been allocating stock funds to stock funds in India and international stock markets.
“Some funds have been transferred from arbitrage funds to our value funds and active mixed funds (only around 2%). However, when the valuation is correct, the exposure to my dynamic asset allocation fund will automatically increase equity exposure.”
He said he prefers funds designed to move dynamically across asset classes based on market conditions, thus reducing his involvement. “I prefer a portfolio that is as autonomous as possible. So I can simply let the investment grow and refine without having to patch a lot. My intention has been to reduce the number of decisions in the portfolio and even make a certain degree of decisions in the portfolio to minimize my impact on investment bias and to minimize my impact on investment bias.”
His medium and small caps have a 20% exposure rate, while 80% of his shares are big hats. The market capitalization split is based on equity exposure through FlexICAP and hybrid funds.
“I have broadly retained the 65:35 distribution over the past three years, with 65% distribution to Indian and global stocks and 35% distribution to bonds and gold. Still this is true today,” he said.
About 88% of his investments are through the DSP MF program.
Portfolio Performance
Parek said he prefers to track his portfolio to check short-term performance. “The market will be up and down during the transition period, which is good. My portfolio may not perform well in some ways, which is also good. As long as my funds are designed to be lower during market volatility, this is what I look for when choosing funds – I can have a portfolio in the market Eniuphor lag behind the market Eniuphor, and that’s what I need.Ia. ”
Until last September, Parekh said his 65:35 (equity: non-equity) portfolio had revenues of 1.5-2% lower than the Nifty 500 index. At this point, the Nifty 500 index has an annual growth rate of 21% over the five-year period.
Focusing on funds designed to cope with his low tolerance for volatility, he said his portfolio has buffered over the past year due to market corrections. “Since the peak in September, the market has dropped 12%. My 65:35 portfolio has dropped 3% due to the buffers of bonds, gold and stock hedges,” he noted.
Parekh’s 65:35 portfolio has received 22% annual returns over the past five years, while the Nifty 500 portfolio has already provided 24% annual returns, and the positive hybrid index will provide 18% annual returns.
“These gains are higher than usual returns as Covid-19 prices have been backed by five years,” he warned.
His allocation to long-term debt and gold was to his portfolio. “Bonds in the past year have already returned more than 8-10% in the past year because interest rates have fallen down. Gold has made its usual returns during uncertainty periods. Last year, gold had nearly tripled its long-term average rate last year and its long-term average rate of return was nearly tripled at 11%,” Parekh said.
Not just a reward
“I’m going to build my own portfolio over the next 20-30 years. So it doesn’t make much sense to me for the past year or five years. I believe what Morgan Housel said about Morgan Housel about getting a reasonable rate of return in an unreasonable time. When you’re unreasonable time, you don’t have to worry about anything suddenly,” Parekh said. ”
He said that if anything, the past five years have only strengthened his investment principles. “The five-year period began with the Covid-19-19 pandemic. The market began to rise sharply from the lows of Covid-19-19, and now we are again seeing corrections to these tariff-related uncertainties. Knowledge that focuses on news flow or local events with limited value, and construction or various outcomes in the portfolio will always be gradually reduced – investors in the entire investor can make up. Investors are always there. – Parek said: “Not being shocked by market volatility. ”
He said he wanted to minimize risks, rather than chase rewards. He explores risks from the prism of valuation. “When the valuation is high, I increase my exposure to protective assets such as mixed funds, debt, gold, etc. When the valuation is cheap, I increase my allocation to growth assets such as stock funds.” His maximum ceiling for equity allocation is 80%. He added: “I will maintain at least 20% of the non-equity distribution in my portfolio to diversify assets with less relevant stocks.”
Parekh said he has not used his equity investment cap limit yet because he is not satisfied with the valuation. He has always adhered to his 65:35 equity: non-equity distribution rules.
“I’m trying to think about alternative history. If my point of view goes wrong, the portfolio will still remain resilient and still provide reasonable returns. This framework guides me to build a slightly conservative portfolio.”
He cut his midterm exposure around the election last year due to high valuations and redistributed the funds to a hybrid strategy.
Also Read: Mirae Asset CIO says investors should adjust their return expectations
Money talks to son
Parekh regularly talks with his son about investment and monetary management. He also posted a scroll of his son, where he asked his son to explain the new concept of currency he learned.
He said he tried to instill basic monetary principles in his son, which he got from his mother. That’s – buy quality, but buy it cheaply. “Whether it’s buying anything – shoes, clothes, bats – I always tell my son to look for something good and wait for a discount if possible. He can apply for an investment, too.”
He said: “Now, my son is 18 years old and is pursuing engineering.
Important points
Parekh’s investment approach shows the benefits of building a diversified portfolio across asset classes. There is no guarantee that the asset classes that outperformed last year will continue to do so. Instead, winners and laggards are more likely to swap positions. A portfolio that spans asset courses will find winners in some pockets or others.
Parekh prefers funds, which dynamically switches from expensive to undervalued asset classes, thus reducing the need for his intervention and thus minimizing the impact of his own behavioral bias on investment decisions.
Key Learning
Consider different asset classes when building your own portfolio
Asset allocation is a wise choice to avoid personal bias
Your asset allocation depends on your risk tolerance
Stick to your asset allocation; see cheap valuations as opportunities
