When people invest their money they are more or less forced to do an asset allocation. This could have been historical, deliberate or accidental.

I see people with one house (in which they are living), some equity investments, some mutual funds, and some fixed deposits. The thing is the whole ‘asset allocation’ is just a chance. Last week I was seeing the asset allocation of a 65 year old and there was a 50% equity and 50% debt kind of a portfolio. He also had a pension from LIC (super annuation), and some consultancy income. At this stage he did not need his income from dividends or even his interest income.

When I saw his portfolio I realised that HUL was the biggest share in his portfolio and he had done NOTHING to his portfolio since the 1980s. No fresh purchases, no sales…just accumulated the shares. Fairly obviously he was sitting on a lot of duds that did nothing for him. His uncle had given him some rights form of HUL that he faithfully filled…surely it had appreciated over such a long period of time.

He had some FDs which his wife was regularly renewing….and it included some stupid NBFCs. One such NBFC is a favorite amongst the middle class, but to me it looked (s) shady. I will not name the 3 -4 FDs he had – I know 2 of the promoters.

So clearly here was a portfolio running into 8 digits, but created almost thoughtlessly…but more luckily. He had not YET LOST any money on FDs except about Rs. 30,000 in the 1980s…the company just shut down. He hae equities and an FD in that Mumbai based engineering company….

My portfolio clearly has an equity bias and will remain so. You should have a bias that makes you happy, and achieve your goals WITHOUT giving you sleepless nights. Elsewhere I have written that I am indifferent to your portfolio. Let me just reiterate that. There are people who try to draw me into an argument about how FDs are good – even great. Good for you.

I am with equities, and not sad for that.



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  1. This is very common among people of 60 plus years…a vast majority of them have their investments in a bits and pieces fashion….or for that matter, so does people under 60:)…very few investors focus on their real goals and construct their asset allocation according to that…its mostly the flavor of the month or some products bought to save tax.

  2. Yes Subra Sir,

    I like this post, I am myself of the opinion that the appetite for Equity grows over the year unless you are Gujrati or marwari :).
    for everybody else equity investing does not come naturally & needs to grow on you.

    You hit the nail on the head when you said asset allocation should be what gives you comfort. example if a person new to equity goes by the average advise as per financial planners & invests 60-70% in equity I am quite sure he will get Blood pressure Diabetes etc within 3-6 months because he will not be able to handle the stress that comes up with equity.

    The fact is you are at the top of the pyramid with your equity bias, but 95% are at the bottom many of whom keep money in savings bank accounts because it is safe…….

  3. I feel the internet has done wonders to how you can keep track of your investments. It has become very easy and transparent. I still remember going over the small print in Eco Times every Monday to see how my stocks have done.

    Mutual funds have also matured. I did not loose any money in Unit 64 but my parents did. We have come very far from that age. Retirees should use the net based resources available today to track their equity based investments. Nothing should be left for chance after you retire. Your risk bearing ability gets diminished. To get returns more than inflation, it is necessary to have equity exposure through out your life.

    I see nothing wrong in having some blue chips in your porifolio where you do nothing. Just enjoy the dividends. You only make the broker rich by frequent unnecessary churning of you portfolio.


  4. The dividends go to the account where my demat account is linked. The total comes to a very tidy sum yearly. I use it for leisure holiday travel expenses. I do not use this account for any other purpose therefore it is always a surprise to see what has accumulated. The old investments do pay a very high % return only on dividends. That too tax free.

  5. Subra Sir,

    I agree completely with rajeev, Direct Equity is the best & cheapest way, I have a lingering question may be subra sir will answer, When i analyse the portfolios of mutual funds through the Morningstar X ray thing I constantly find that 60%-70% stocks do not change at all for much of the time does this mean we are paying the mutual fund companies around 2.5% of total corpus for managing 30-40% of corpus that translates into 15% management fee if you understand that 60% shares remain constant. I have been a very enthusiastic about the Mutual funds but this question had made me really scratch my head, Subra sir ????

  6. using dividends for holiday travel expenses does not seem to be the mark of a professional investment portfolio. dividends should be ploughed back into the portfolio as per the asset allocation need.
    holiday expenses should be part of regular budgeting. i wonder if your family would appreciate downgrading from 5* resorts to 1* motel just because the company went in expansion mode & reduced the dividend payouts…

  7. Dr M Chandrashekhar

    Dear Subra,

    I appreciate your blatant equity bias because you are a financial professional & you can handle your risks.

    For others, it would be suicidal if one banks on equities for major part esp. if one is not very financially savvy. Luck played a great part for me whilst I was dabbling in Equities– it was a sort of gamble for me– Better sense prevailed with age & I prefer Equity MF route & minimal direct Equity. Though the return is not very great, Iam happy I can manage it well with my limited knowledge & have good sleep without Scotch or Sedatives !

  8. I have a debt and gold bias and 98% of my portfolio is in these only. For the first time, I have started SIP in equity MF this year. Just pondering whether direct equity exposure is needed. Also not sure about RE.

  9. Now a days, I am not seeing anybody who are saving money in FD’s (atleast in south India). Every body is INVESTING in Real Estate 🙂

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