Introduction to Model Portfolios
With Yadnya’s Model portfolios, what we are offering is making complicated investing simple. These Model Portfolios use the 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 strategies followed by tactical sectoral allocation at the stock level. As Roger G. Ibbotson, Professor of Finance at Yale School of Management says, “On average, 90 percent of the variability of returns and 100 percent of the absolute level of return is explained by asset allocation.” For conservative investors, we do not want too much variability in the returns. The Conservative Model Portfolio, true to its investment objective of returns by taking a low risk, a healthy allocation is done between both equity, debt, and money market asset classes. Exposure to large-cap equities is through Stocks and Mutual Funds while exposure to Fixed Income and Money Market is purely through Mutual Funds.
The aim is to generate returns by creating a large-cap and debt-oriented portfolio with low risk.
Buy and Hold investments with a time horizon of 3 years in stocks and mutual funds with low risk and consistent performance.
The 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 low-risk large-cap and debt-oriented portfolio, we suggested this strategic allocation of 50% in Mutual Funds (Both Equity & Debt), 30% in Direct Equities, and 20% in Money Market Funds.
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 consumers 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 of India’s consumption story and expected growth in the 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 the 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 airlines.
We follow a proprietary FIVE-G framework for bottom-up analysis of stocks. The framework of Financials, Industry Analysis, Valuation, Enterprise (Business Model), and Governance, helps in analyzing 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 forgets type of product unless and until there is a significant change in management or a market event-based trigger.
Debt funds being less volatile, help as a cushion from an asset allocation perspective, and by investing in a different asset class, we are diversifying our portfolio risk. However, given the low-risk profile, the allocation to this asset class when the model portfolio was initiated in Dec 2019 was 20% for this portfolio; this was later changed to 15% in March 2020 rebalancing and now in Sep 2020 rebalancing we have brought this allocation back to 20%. We have primarily considered Liquid and money-market funds in this asset class.
ETFs and Index funds are passive investment 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 conservative portfolio is appropriate for an investor with a low-risk tolerance and a time horizon longer than 3 years. Conservative investors are not willing to accept periods of extreme market volatility and are seeking returns that match or slightly outpace inflation. They mostly prefer high dividend-yielding or less volatile Blue-chip stocks and steadier & predictable bonds or money market instruments.
The highest gain this portfolio might have in a calendar year might be 15% and the worst decline might range from 5 to 10%.
Here are typical profiles who can refer to this portfolio –
1. A low-risk taker 20 – 30 Years old investor with high liabilities and low savings rate
2. A low-risk taker 35 – 50 years old investor with dependents and average or below average savings rate
3. A medium or low-risk taker above 50 years old investor
Time Horizon – Min. 3 years
Benchmark – Yadnya 70-30 TRI Index
Rebalancing - Quarterly
Inception Date – December 1st, 2019
Launch Date – December 6th, 2019
Last reviewed – May 25th, 2022
Next Rebalancing on – August 25th, 2022
This chart shows the portfolio’s cumulative performance starting from its inception in Dec 2019 until the latest month-end. The Conservative Model Portfolio is compared against Yadnya 70-30 TRI Index cumulative returns as a benchmark.
Conservative Portfolio's performance against Yadnya 70-30 TRI Index*
*(70% S&P BSE SENSEX & 30% SBI Banking and PSU Fund)
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 Portfolio are prepared by SEBI Registered RIA.