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Best Moderate Model Portfolio in India | Model Stock Portfolio

Moderate Model Portfolio in India | Model Stock Portfolio | Yadnya Investment Academy (Methodology Document)

Published on 31 May 2021 Views 8827 Comments 28

Introduction to Model Portfolios

With Yadnya’s Model portfolios, what we are offering is making complicated investing simple. These Model Portfolios use same asset allocation philosophy that many institutional investors utilize. The main pillars of the model portfolios are our research-based products – Stock-o-meter (https://investyadnya.in/stock-o-meter), Mutual Fund Subscription (MFYadnya.in) and Financial planning product (FinPlanYadnya.in). The idea is to utilize quantitative and qualitative factors observed based on our extensive research for suggesting model portfolios that make sense for individual investors like you. The foundation of these portfolios is asset allocation strategy followed by tactical sectoral allocation at stock level. As Ray Dalio, the famous Hedge Fund Manager & Founder of Bridgewater says, I think that the first thing is you should have a strategic asset allocation mix that assumes that you don't know what the future is going to hold.”

For moderate risk profile investors, optimum allocation is done between equity, debt, and money market asset classes. Exposure to equities is through Stocks and Mutual Funds both while the exposure to Fixed Income and Money Market is purely through Mutual Funds.

 

Methodology


Guidelines

  1. 10 - 15 stocks portfolio
  2. Stock portfolio - Minimum exposure of 5% and maximum 10% to avoid concentration risk.

 

Moderate Portfolio

Investment objective

The aim is to generate reasonable growth without taking too much risk by creating a multi-cap, growth-oriented portfolio.

 

Strategy

Buy and Hold investments with a time horizon of 5 years in stocks and mutual funds with strong fundamental characteristics and sound management.

 

Rationale for this Portfolio

We have included three modes of investment vehicles in this model portfolio - Stocks, Mutual Funds and Fixed Income/Debt assets. For meeting the investment objective of a growth oriented multi-cap moderate risk portfolio, looking at the long-term expected returns and risk levels of each asset class based on our long-term view of Indian economy and financial market, we suggest this strategic allocation of 50% in Direct Equities, 40% in Mutual Funds and 10% in Debt Funds.

Please note this model portfolio is suitable for investors with moderate risk tolerance and risk appetite. Typically, to begin investing, we recommend starting with the mutual fund route, wherein you rely on the professional expertise of fund managers for making stock choices for you. After the initial learning curve, we suggest following it up with the approach of Mutual Fund driven portfolio with some percentage of direct stock exposure.

Stock Selection Approach

We are a firm believer of Warren Buffett’s principle where he says that an individual should invest only in the companies whose business they understand. And therefore, we have chosen “Consumption” as the core theme for constructing these portfolios along with some peripheral stocks i.e., investing in companies that are into consumer centric businesses that grow with consumption and businesses that are into financing this retail consumption. We are a believer in India’s consumption story, which include sectors such as – Banking & Finance, FMCG, Consumer Durables, Automobile, Paints, Healthcare, Retail, Telecom, Tourism, Real Estate etc. This report by World Economic Forum gives a glimpse about India’s consumption story and expected growth in next 10 years. There are a few peripherals stocks too that do not fit completely into the consumption theme, but their inclusion is driven by strong fundamentals of the company and the company’s effort in making their brand and product visible to retail investors. We have purposely stayed away from sectors like airline.

We follow Yadnya’s FIVE-G framework for bottom-up analysis of stocks. The framework of Financials, Industry Analysis, Valuation, Enterprise (Business Model) and Governance, helps in analysing stocks and with the stock selection process within each sector’s tactical allocation.

 

Fund Selection Approach

Mutual Funds help in easy diversification and tapping on professional fund management and research expertise via an easily accessible channel. It is truly an invest and forget type of product unless and until there is a significant change in management or a market event-based trigger.

Debt funds being less volatile in nature, help as a cushion from asset allocation perspective and by investing in a different asset class, we are diversifying our portfolio risk. However, given the growth and medium risk objective, the allocation to this asset class is at 10%. We have considered corporate, liquid and money-market funds in this asset class.

ETFs and Index funds are passive investing funds that are linked to an underlying benchmark index and provide a low-cost alternative for taking exposures in the financial market.

We have utilized our proprietary fund selection FRRISK methodology - MFYadnya.In for shortlisting and adding equity mutual funds, debt funds and ETF/index funds in model portfolios.

Is this model portfolio for you?

This moderate portfolio is appropriate for an investor with a medium risk tolerance and a time horizon longer than five years. Moderate investors are willing to accept periods of moderate market volatility in exchange for the possibility of receiving returns that outpace inflation by a significant margin.

Most investors tend to fall into the moderate category, which means they want to achieve good returns but are not comfortable taking high levels of market risk. This moderate portfolio might get an average annualized return of 11-12%. Its best yearly gain might be 15-20% and its biggest decline in a year may range from 20-25%.

These are typical investor profiles who can refer to this portfolio –

  1. A low-risk taker 20 – 30-Year-old investor with limited liabilities and above average savings rate
  2. A medium risk taker 35 – 50-year-old investor with dependents and average or above average savings rate
  3. A high-risk taker above 50-year-old investor with limited liabilities and good retirement corpus

 

Time Horizon – Min. 5 years

Benchmark – BSE 200

Rebalancing - Quarterly

Important Dates

Inception Date – December 1st, 2019

Launch Date – December 6th, 2019

Last reviewed – September 15th, 2021

Next Rebalancing on – December 15th, 2021

Performance

This chart shows the portfolio’s cumulative performance starting from Jan 2015 until the latest month-end. The Moderate Model Portfolio is compared against BSE200’s cumulative returns.

Time Period

Portfolio Return %

BSE 200 Index Return %

1 month (from August 31st to September 30th)

3.31%

4.41%

3 months

8.5%

12%

1 Year

45.81%

61.22%




Disclaimer: The information on this site is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF. All these portfolios are created based on our expert’s experience in the market. These Model Portfolios are prepared by SEBI Registered RIA.

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