1. For an average regular Indian MF investor in his 30s, "domestic bias" is adequate for meeting his clearly distinguished short-term, medium-term and long-term goals, through a simple, uncluttered, and systematic allocation of his regular hard-earned savings, without trying to "time" various international markets to achieve them.
2. His short-term goals include buying durables like furniture etc., a new car, and maintaining an emergency fund for contingencies.
3. His medium-term goals include buying his own home, and his kid’s basic and higher education.
4. His long-term goals include marriages of his children, his own retirement planning, and taking care of his aged parents too.
5. In addition, he also buys some gold, an online term plan to cover 10-15 years of his annual income for securing his family in case he's not around, a family floater medical plan, and tax-saving ELSS / PPF, besides having to borrow for buying his home, and for kids' education.
6. While funding all these activities, he has to also keep in mind domestic long-term inflation, so that all his "diversified" investments are always inflation-beating till the time of meeting goals, otherwise the entire investment aim crumbles.
7. He, therefore, aims adequate diversification in domestic funds, to achieve his goals, by:
a) Fund structure - largecap, midcap, smallcap, multi caps, hybrids;
b) Investment style - growth, value, blend, sectoral, thematic;
c) Risk profile - high, medium, low.
8. He doesn’t invest in more than 6-8 funds, including debt and equity funds, for easy monitoring, and avoiding duplication, as he is aware that such a diversified portfolio will average out gains of outperformers and losses of laggards, instead of the latter severely pulling down the former as seen in over-diversified portfolios having a bit of all types.
9. Regarding the likelihood of Indian market under-performing the developed markets, it's unlikely in the long-term, which should be a major criteria for choosing mutual funds.
10. An Indian can ill afford to ignore impact of domestic inflation (7% assumed, 10% more likely, 15% on education), during his fund selection for the success of various goals.
11. Because of this single "inherent villain", which remains uncontrolled in real terms (ignore figures doled out), due to very diverse unique factors, average Indian investors aren't still positioned to invest in assets which can't beat it effectively to meet long-term goals.
12. Meticulously "investing" during their earning years in "multi-asset classes" like fixed income, gold and real estate, without taking into account (naively) well-known real "sticky" inflation, has upset the liquidity and returns of several earners when actually needed.
13. Indian economy, due its vibrant diversity, continues to remain immune from established universal portfolio theories principles, but is still a "slave" of sticky inflation, which has seen several economists fail in reining it in, and an inflation of 7%, 10% and 15% halves an investor's various goal baskets in every 10, 7 and 5 years wherever he invests.
14. Hence, international products are not yet viable to meet long-term goals at the domestic level in the current high real inflation scenario, which leaves very little money to invest for most investors, for sparing even 10%, which can be utilized better by optimizing his returns through a domestically diversified portfolio.
15. Regarding diversification of asset allocation, Indians invariably expose themselves to cash, debt, equity, gold, and real estate in their lifetime which is already "well diversified"!
2. His short-term goals include buying durables like furniture etc., a new car, and maintaining an emergency fund for contingencies.
3. His medium-term goals include buying his own home, and his kid’s basic and higher education.
4. His long-term goals include marriages of his children, his own retirement planning, and taking care of his aged parents too.
5. In addition, he also buys some gold, an online term plan to cover 10-15 years of his annual income for securing his family in case he's not around, a family floater medical plan, and tax-saving ELSS / PPF, besides having to borrow for buying his home, and for kids' education.
6. While funding all these activities, he has to also keep in mind domestic long-term inflation, so that all his "diversified" investments are always inflation-beating till the time of meeting goals, otherwise the entire investment aim crumbles.
7. He, therefore, aims adequate diversification in domestic funds, to achieve his goals, by:
a) Fund structure - largecap, midcap, smallcap, multi caps, hybrids;
b) Investment style - growth, value, blend, sectoral, thematic;
c) Risk profile - high, medium, low.
8. He doesn’t invest in more than 6-8 funds, including debt and equity funds, for easy monitoring, and avoiding duplication, as he is aware that such a diversified portfolio will average out gains of outperformers and losses of laggards, instead of the latter severely pulling down the former as seen in over-diversified portfolios having a bit of all types.
9. Regarding the likelihood of Indian market under-performing the developed markets, it's unlikely in the long-term, which should be a major criteria for choosing mutual funds.
10. An Indian can ill afford to ignore impact of domestic inflation (7% assumed, 10% more likely, 15% on education), during his fund selection for the success of various goals.
11. Because of this single "inherent villain", which remains uncontrolled in real terms (ignore figures doled out), due to very diverse unique factors, average Indian investors aren't still positioned to invest in assets which can't beat it effectively to meet long-term goals.
12. Meticulously "investing" during their earning years in "multi-asset classes" like fixed income, gold and real estate, without taking into account (naively) well-known real "sticky" inflation, has upset the liquidity and returns of several earners when actually needed.
13. Indian economy, due its vibrant diversity, continues to remain immune from established universal portfolio theories principles, but is still a "slave" of sticky inflation, which has seen several economists fail in reining it in, and an inflation of 7%, 10% and 15% halves an investor's various goal baskets in every 10, 7 and 5 years wherever he invests.
14. Hence, international products are not yet viable to meet long-term goals at the domestic level in the current high real inflation scenario, which leaves very little money to invest for most investors, for sparing even 10%, which can be utilized better by optimizing his returns through a domestically diversified portfolio.
15. Regarding diversification of asset allocation, Indians invariably expose themselves to cash, debt, equity, gold, and real estate in their lifetime which is already "well diversified"!