8. Portfolio Framework

Portfolio needs to be created for a objective. Based on the type of objective pick and plan the portfolio.

Gifting

• Example: Child Birth

• Long Term 20+ years

• Goal - None

• Invest in - Nifty Index

• Check

  • PE, L < 20, H > 27

  • EGR, L < 15, H > 15

• Decision

• • PE H and EGR H - Don't Buy, Invest in Debt

  • PE L and EGR L - Yes

  • PE L and EGR H - Yes

  • PE H and EGR L - Yes

Important Goals

• Example: Education, Marriage, Retirement

• Corpus safety is very important

• Horizon

  • < 5 years - Invest in Debt 100%, Equity 0%

  • 5-10 years - Invest in Debt 50%, Equity 50%. Plan SIP in both to fulfill 50% of FV corpus by Debt and 50% of FV corpus by Equity. This means Debt SIP to be higher than Equity SIP

  • > 10 years - Invest in Equity 100%, 10 yrs is even better

    • One Time - No

    • SIP - Yes

    • Nifty - Only

    • Check - Nothing

    • Start - Now with SIP (No waiting required)

    • Keep Monitoring - Withdraw from Equity as Goal gets achieved (early) and put the money in Debt funds

Wealth Maximization

• Based on PE and EGR

• Suppose current June 2021

  • PE is high ~30

  • EGR is low

  • Check Dow, since PE and EGR both are not Low

  • Could invest 50% in Equity, 50% in Debt

    • 30 - Nifty

    • 5 - Energy

    • 5 - Infra

    • 5 - IT

    • 5 - Bank

    • Many combinations are

    • Nifty Only

    • Nifty + Next 50 (when Next 50 PE < Nifty PE)

    • Nifty + Next 50 + Sector

    • Nifty + Next 50 + Sector + MF

    • Nifty + Next 50 + Sector + MF + Stock

  • Make a STP plan from Debt to Equity

    • Take monthly interest from Debt and invest to Equity

    • Could also tweet this strategy

• PE - L AND EGR - L : Buy

• PE - H AND EGR - H : Don't Buy

• PE - L AND EGR - H Or PE - H AND EGR - L : Mixed Signal

  • Check P/B (from Nifty site)

    • P/B show capacity to build

    • P/B low means capacity is there however not very utilized, more production would not require the capex

    • P/B high means capacity mostly used, next expansion would require the capex

    • Jun 18 2021, 4.32

    • Define range of P/B high and low, Check Jan 2008(High - 6.55) and Oct 2008 (Low - 2.12)

    • Median P/B is (2.1+6.55)/2 = 4.3

    • Today's P/B is median (not very Low)

  • Check MCap/GDP

    • As GDP grows, the demand grows which results in Stock price growth

    • 1.5: Expensive

    • 0.5: Cheap

    • Current : 1.15 on June 04, Highest since 2008, This is towards expensive side

Worksheet - Max

• Check PE at Nifty

• Check EGR at Excel-sheet

• Check Dow Signal at Chart - Nifty, Next50