07 Aug

Our Philosophy for Equity Investments

Equity investments potentially give very large returns over the long term but entail high volatility in the shorter term. Our philosophy on equity investments would be guided by the following thoughts:

1. Clients having allocation less than Rs. 25 lakhs for equity investments would be better off investing in equity mutual funds. These are recommended for their tax efficiency, professional management, ease of execution and flexibility.
2. Equity Portfolio Management Scheme (PMS) would be recommended to clients where the allocation to equity portfolio is greater than Rs. 1 crore. This is because the minimum investment size for equity PMS is Rs. 25 lakhs. However do note, PMS have much larger cost structure compared to direct equity, ETF’s and Equity mutual funds.
3. The entire equity portfolio comprising of Equity PMS, Direct equity, Equity mutual fund including the existing allocation of the client will follow diversification so as to not get exposed to single sector, company or geography.
4. The driving theme while constructing the equity portfolio would be such that a larger allocation would be given to Multicap Portfolio and Value/ Contra Strategy. A smaller portion would be allocated to Global equities and Midcap/Smallcap Portfolio.
5. Investments in equity mutual funds and direct equity need to follow the principles of time diversification. This means the portfolio needs to be built gradually over a period of time, to reduce the risk of market timing.
6. We believe that for investors who are focused on equity mutual funds, allocation to five equity mutual funds with different investment styles would be sufficient to capture growth of equities. This would not only give focus to the portfolio but also give adequate diversification.
7. Passive funds like Exchange traded funds (ETF’s) or Index funds would be considered where the returns of active fund managers are much lower than such passive funds.
8. We would avoid thematic and sectoral funds as much as possible.
9. Allocation to direct equity should be done between 10-15 stocks. The allocations to individual stocks would be equal and the portfolio built gradually.
10. Lot of emphasis would be given to reduce the cost of equity portfolio thereby helping the client earn better returns. Towards this, we will focus on low cost ETF’s , Direct plans of equity mutual funds, low brokerage while executing direct equities and avoiding or reducing capital gains tax/ exit loads by holding the portfolio for longer term with minimum churn.
11. We believe Midcap and Smallcap equity mutual funds/ PMS can earn higher returns than we hunting for such portfolio. Hence, allocation to direct equity and ETF would be predominantly in Largecap stocks (Top 100 companies by market capitalization).
12. We would not recommend to take exposure in equities through Unit Linked Insurance Plans (ULIP’s) as there is a longer lock-in and higher cost.
13. We would not shy to increase equity allocation when the underlying news flow is bad and valuations are very attractive. Vice-versa is also true.
14. Our exit decisions on equity investments would be based on rebalancing strategies if, the equity allocation increases above the risk taking ability of the clients or financial goals approaching in the next 3-5 years. We might also exit if there are better avenues than the current portfolio. No exit would be dictated by short term underperformance.
15. Clients who can digest severe volatility in the shorter term, who have made adequate arrangements for their short term requirements, can wait for a minimum investment horizon of 5 years and above and following our equity investments principles would be best suited to benefit from the power of equity investing. We would not be giving trading and speculative calls.

Finally, Long term returns in equity are more of a result of patience, discipline and holding-power rather than the actual product itself.


1. Equity linked instruments are subject to market risks. There is no guarantee of returns.
2. Equity linked instruments are not suitable to investors with less than 5 years investment term.
3. Equity linked instruments undergo severe short term market volatility.
4. Past performance of equity linked instruments whether good or bad might not sustain in future. Please understand the scheme features carefully before investing.


1. Naveen Julian Rego has a majority stake in Naveen Rego Wealth Managers Private Limited which is an execution only company distributing all Indian Mutual Fund schemes under the broker code ARN -23315. In lieu of the distributor agreement with the MF companies, the said company receives brokerage in the range of 0.05 to 1% (upfront or p.a.) depending on the scheme and the assets transacted.
We however, insist our clients to execute the transaction directly with the respective financial institutions, so as to reduce the implication of brokerages/ higher cost and non-transparency.

2. Naveen Julian Rego and his family members might be holding the recommended stocks and mutual funds in their personal portfolio.

Feel free to get in touch with us for more clarification at 9741157582/0824-4280101 or assistant@naveenrego.com

Have a wonderful day!!

Naveen Julian Rego-CFP
SEBI Registered Investment Advisor
Reg. No. INA200004250

Date: 14th August, 2018.

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