I have an all-stock portfolio, primarily comprising large-cap stocks. But financial advisors advise against it. Do you agree?
The orientation of your portfolio should depend on your age, stage, risk profile and time horizon. Since you have not shared the details, it would be very difficult for me to comment on your specific portfolio asset allocations. However, a proper asset allocation should have all the major asset classes for investment, such as equities, fixed income, bullion, real estate and insurance. Their percentages might vary according to the situation of the investor.
A younger person with steady earnings and lower financial responsibilities would normally have a higher-risk appetite and could invest for a longer period. Therefore, they could have a higher exposure to equities in their portfolio as compared to an older person with greater financial responsibilities or a shorter-investment time horizon.
How good an investment avenue is a life insurance company’s unit-linked investment plan (Ulip)? What returns do these give? My friends have invested in four-five of these. Even I plan to do so, if they are good. Please advise.
A Ulip provides you a life-risk cover along with investment returns. These are generally long-term investment products. The life cover mortality charges and other charges levied by the insurers are deducted from the premium paid and the balance is invested in a scheme of your choice. You may have a choice of investing in debt or equity schemes, or even a combination of both. You can also switch from one scheme to another. The returns depend on the charges as well as the type of fund you invest in. These products have a lock-in period of five years. Instead of opting for a Ulip, you can opt for a pure-term insurance policy and invest the balance money in a mutual fund.
Given the market condition, I had booked profits on half of my seven-year-old equity portfolio, and equally invested in defensives. How long should I hold on to this theme?
I understand when you say you have booked profits on your equity portfolio and invested in defensives, you mean defensive stocks. Going by that, you could have benefited from this tactical portfolio allocation since defensives have outperformed the broad markets in the recent past. How long you should hold on to this theme will depend on the overall economic situation and the markets. As long as economic uncertainty prevails, defensives could continue to outperform the broader markets.
However, in case we see an economic turnaround and falling interest rates, then defensives could start under-performing and rate-sensitives could start doing better. Therefore, you would have to watch out for such signs and make your moves accordingly.
The writer is CEO, Dalmia Securities. The views expressed are personal