My attitude towards risk is simple: A lot of my money is now got into the risk free territory. These are blue chips bought at a very low cost, huge dividend moat, and PPF.

So do I take risk now? The answer is yes of course, but in micro bites. I would buy say 200 shares of Colgate at 1700 to sell at 2200. I do understand that buying at 200 pe has its risk, but if the growth and FCF (Free cash flow) justify it, sometimes it is worth taking the risk.

I have not reallocated among my assets – ideally according to my Investment Plan I should have reallocated more assets to debt instead of being so much in equities. Why did I not reallocate? Simply because I did not want to allocate more money to debt in absolute terms. My debt portfolio too has been growing, and it did not make sense to allocate more to debt. Also even in my father’s case, the dividend income ensures that even if I do not reallocate, his primary objective of meeting his life objectives will be met. So go and learn about asset allocation – it is the single most important thing in your portfolio.

Am I worried about inflation? In my portfolio inflation will not matter. I want my EARNINGS to beat inflation. My equity CAGR will surely beat inflation. So inflation is no longer a bogey that I worry about. It has been built into my expectations and my portfolio is now tackling inflation well – almost on auto pilot. Also being in the growth option of debt funds allows me to match inflation because of the tax deferral.

I have an equity portfolio and am dividend dependent. However the surplus in the dividends received go towards building a debt portfolio. This more or less removes the need for asset balancing on a regular basis. Also one has to realize that AA is like insurance – a risk mitigation / reduction tool, NOT A WEALTH CREATION TOOL. You cannot get rich because you have a lot of insurance. Yes your insurance company can. And it does.

 

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  1. Do you not own any bonds?

    PPF is taxfree, but it’s rate can follow the reducing interest rate trend. Bonds on the other hand give out a fixed interest every year, of course it is taxable.

  2. Subrabhai,
    Silly question: why is your div surplus not going back to either blue chips or colgate-type trades?

    Thanks for an interesting post.

  3. “So go and learn about asset allocation – it is the single most important thing in your portfolio.”
    I find learning asset allocation is practically difficult. There are no good articles on how to go about it, more importantly the thought process of how to think about asset allocation.
    Easier said than done 🙂

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