Contrary to general belief, the process of studying and learning does not end when you graduate out of college. It is a continuous process. If you stop learning, you will fail to adapt to the changing environment. You know what happens to stagnant pool of water? Same way, in true sense, long term portfolio or building a long term process, you need to adapt. As you learn more, you need to make changes. During the early phase of TIPBlog, I presented different investment buckets that I use or planned to use.
To refresh, these buckets are not asset allocation. How can that be? A true asset allocation should not have co-relation or may have very low co-relation. The ones that I show on this post, are all co-related and hence, not asset allocation. All are equities! When we talk about asset allocation, what it means is savings, FDs, bonds, equities, gold, etc. They are investment vehicles that are likely to provide true asset allocation benefits. Out of all these, I only focus on writing about equities on TIPBlog. Continue reading rest of this article…
My objective of investing in index based ETF is to have a total return that is somewhat similar to the market performance as a whole. It also acts as my benchmark for other long term portfolios. As mentioned in earlier post, if I cannot beat the market by stock selection, I should just close my long term portfolio and invest everything in these index ETFs.
I have been trying to understand the options available for the index based investments that include index based mutual funds or exchange traded funds. In principle, I am fan of exchange traded funds because (a) they follow a given index; (b) no manager involvement; and (c) low cost structure. Index based fund investments are very good vehicle if an individual wants to avoid stock selection and just wants to follow the index performance. In general, for last 10 years, the NIFTY index has returned an average of 15.5% per year. This return excludes the dividend payments.
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