I keep talking about having an Investment Philosophy Statement. What exactly is this?
Well for an individual it should have the following: Objective, Constraints, Fears, Investing target, Asset allocation target, rebalancing strategy, Reasons or basis for change in strategy, Monitoring methodology.
The Objective / Goal statement can be as simple as:
Accumulating Rs. 10 crores for Retirement (30 year perspective)
Accumulating Rs. 4 crores for daughter’s education (18 year perspective)
Constraints (under which I operate now – this might change over time)
– I am a little scared of equities, but will learn about it over time
– Currently there are no taxes on investment income, that might change
– Current value of portfolio is only Rs. 55,000
– Parents have NEVER invested in equities or other mutual funds
– Not sure of the company in which I am working
– My spouse puts pressure to open bank RD and PPF
– Not sure how my BRAIN will react if market remains down for 3 years
– Can invest only Rs. 10,000 per month, but will increase it by 10% every year for the next 10 years for sure.
Asset Allocation Target:
– Will be 100% in Equities till 2028, then will decide on shifting some money to debt funds
– No balancing / rebalancing etc for the next 10 years, unless there is a huge bull run helping me reach the target much before the time when I need the money.
– As long as my fund is in the top Quartile in performance (post costs, obviously) will not shift out of the 3 funds in which Subra has suggested.
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