We feel that greed is gradually coming back. This is because many have experienced extremely wonderful short term returns especially in small/mid-cap stocks and also in mutual funds focused on these segments. Equity markets are definitely not cheap and investors coming at these levels might have to stay a bit longer and probably get disappointed with the short/medium term performance. While we are not saying that there would be a large correction, but we firmly believe investors should focus on boring risk management strategies to protect and grow their wealth. The following are our thoughts: 

  1. Do not over allocate to small and midcap portfolios (restrict to between 10-20% of your financial wealth). While small SIPs are fine, however avoid one-time large investments.
  2. Money required for the next 1-2 years should have minimum or negligible equity allocation. These could be in banking products (for those in low tax brackets) or conservative mutual funds (in the higher tax brackets). Also, 25% of one’s financial wealth could be here for managing liquidity and sudden shocks. This portfolio could also be used for exploiting some large correction/opportunities if and when they occur.
  3. Mutual Fund industry post SEBI categorization of schemes have couple of good conservative schemes. These would be ideal for investors looking at tax efficient conservative products vis-a-vis banking products.
  4. Regular long-term SIPs in equity mutual funds are fine but tactical switches/transfers could be avoided.
  5. Equity portfolios would continue to beat inflation over longer period of time with large short-term pain. Hence, Equity Mutual Funds and Equity Stock portfolios could be maximum 50% of one’s wealth. Investors having a lower risk profile could reduce this further. Do note that one’s risk profile is not dependent on past performance but on personal cash flow requirement and financial conditions.
  6. Investors having larger financial wealth (upwards of Rs 1 crore) could also look at alternatives like Gold (through SGB’s) and REITs/INVIT’s. Gold allocation could be maximum 10% and REIT/INVIT another 5%. Do note that this portfolio would not make you rich but diversify your portfolio risk.
  7. It is also an opportune time to clean non focused stocks, equity mutual funds and ULIP’s. Booking losses & reducing concentration to a particular stock or a theme is also a prudent strategy in such times.
  8. Complete your assured return portfolio comprising of PPF & Sukanya Samriddhi Schemes (if applicable). Long lock-in and tax efficient structures make them a deadly combination.
  9. Think thrice if investing in physical Real Estate for investment purpose. Buying is easy, maintaining is a pain and selling is even bigger pain. If Real Estate is not your business, then opt for investing in Real Estate Investments Trusts (REITs).
  10.  Day trading, derivatives and margin trading are excellent ways to make good money…. not for you but for your broker and the government. Stay away.

Investors focused on highest returns are missing a point. Past returns are visible and exciting. However, future risks are invisible and waiting to strike when least expected.

Some numbers: If one has got 25% annual returns in Year 1 and Year 2 with the 3rd year return being negative 25%, then the annualized p.a. returns for 3 years fall to roughly 5% p.a. which is a pittance. Higher the losses in later years more is the pain for the entire duration of the portfolio. 

The basic reason to have process-oriented approach in portfolio construction is first to safeguard one’s wealth and post that grow the same. Funding one’s lifestyle, having adequate liquidity when required, tax efficiency and simplicity are the cornerstones in portfolio construction. If greed and higher returns are the only factors driving you, than it is a matter of time you will lose all the past good performance. If risks are managed well, returns will be just be a byproduct. We have been following these strategies on all our client portfolios. 

Talk to your financial planner and understand where you stand. It’s never too late. And for all those DIY (do it yourself) tribe do not confuse luck with skill.


We request you to get  in touch with us at 9845557582 or naveen@naveenrego.com for any clarifications on the above suggestions. 

Wishing you all a safe and exciting investment experience.

Naveen Julian Rego – CFP

SEBI Registered Investment Adviser

Reg. No. INA 200004250 & BASL ID: 1485

Mob: 98455 57582



  1. Investment in the securities market is subject to market risks. Read all the related documents carefully before investing.
  2. Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
  3. Past performance of any asset class is not an indicator of future performance.
  4. The above are broad suggestions and not Investment Advice as individual cases might differ.