Portfolio Drift: How Small Allocation Changes Can Transform Long-Term Risk
Portfolio Drift: How Small Allocation Changes Can Transform Long-Term Risk Quick answer: Portfolio drift is the slow shift of your investment mix away from your target asset allocation, caused by different assets growing at different speeds. Left alone, drift usually pushes an equity-heavy portfolio toward more risk than you planned for. The fix is portfolio […]
Portfolio Rebalancing: Calendar-Based vs Threshold-Based Strategies
Portfolio Rebalancing: Calendar-Based vs Threshold-Based Strategies Quick answer: Calendar-based rebalancing means you reset your portfolio to its target asset allocation on a fixed date, such as once a year. Threshold-based rebalancing means you act only when an asset class drifts past a set limit, such as 5 percentage points. Calendar is simpler. Threshold reacts better […]
Risk Parity vs Traditional Asset Allocation: Rethinking Portfolio Risk
Risk Parity vs Traditional Asset Allocation: Rethinking Portfolio Risk Most investors call a portfolio with 60% in stocks and 40% in bonds “balanced.” By rupees invested, it is. By risk, it is not even close. In a typical 60/40 portfolio, stocks produce roughly 85% to 90% of the ups and downs, and bonds add very […]
Factor Investing in India: Value, Quality, Momentum, Size and Low Volatility Explained
Factor Investing in India: Value, Quality, Momentum, Size and Low Volatility Explained Factor investing is a rules-based way of picking stocks using traits that have historically earned higher returns or lower risk than the broad market. In India, the five factors most investors hear about are Value, Quality, Momentum, Size and Low Volatility. You can […]
Core-Satellite Portfolio Construction: Combining Passive and Active Strategies
Core-Satellite Portfolio Construction: Combining Passive and Active Strategies Quick answer: A core-satellite portfolio keeps most of your money in low-cost, passive investments such as Nifty 50 index funds, and uses a smaller slice for active bets such as mid-cap funds, sector funds, international funds, or direct stocks. In India, the core usually holds 60 to […]
Portfolio Concentration Risk: When High Conviction Becomes Excessive Exposure
Portfolio Concentration Risk: When High Conviction Becomes Excessive Exposure Every investor has a favourite. It might be a stock that doubled in two years, a sector you understand better than anyone you know, or a mutual fund your friends keep praising. Backing it with real money feels smart, and sometimes it is. The trouble starts […]
Correlation Breakdown: Why Diversification Can Fail During Market Stress
Correlation Breakdown: Why Diversification Can Fail During Market Stress Every investor has heard it a hundred times: don’t put all your eggs in one basket. Spread your money across stocks, bonds, gold and property, and when one falls, another will hold up. That advice is sound most of the time. The trouble is that “most […]
Strategic vs Tactical Asset Allocation: Managing Portfolios Across Market Regimes
Strategic vs Tactical Asset Allocation: Managing Portfolios Across Market Regimes Most Indian investors spend weeks choosing a mutual fund and about five minutes deciding how much money should go into equity, debt and gold. That order is backwards. Studies going back to the 1980s, and the Brinson, Hood and Beebower paper is the one people […]
Modern Portfolio Theory in Practice: Why the Efficient Frontier Matters to Indian Investors
Modern Portfolio Theory in Practice: Why the Efficient Frontier Matters to Indian Investors Most Indian investors build a portfolio by accident. A fixed deposit because the family always did it. Two mutual funds because a colleague liked them. Some gold from a wedding. Maybe a plot of land or a flat that took most of […]
The Mathematics of Financial Independence: Savings Rate, Withdrawal Rate and Portfolio Risk
The Mathematics of Financial Independence: Savings Rate, Withdrawal Rate and Portfolio Risk Financial independence means your investments can pay for your living expenses for the rest of your life, so working becomes a choice. Three numbers decide how soon you get there: your savings rate, your withdrawal rate and the risk in your portfolio. The […]