My Portfolio Review 2022: Simplified Automated Goal Based Investing

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Financial Planning And Analysis My First Portfolio Audit 2020 Portfolio Review

In this article, I will provide my portfolio review for 2022. My investing process has become boring after I automated my goal-based investing with a proper asset allocation strategy.

Previously, I discussed an accident that happened in 2016 and changed my life. I also talked about how I started my investment journey from scratch and began using various investment products such as RD, FD, NSC, and various Mutual Funds.

Additionally, I shared my thoughts on how a financial planning course shattered my preconceived notions about personal finance and led me to reorganize my planning. I did my first portfolio review in 2020.

I also talked about how a meeting with a CFA (Certified Financial Advisor) boosted my confidence to be a DIY (Do It Yourself) Investor, where I shared my 2nd portfolio review in 2021. Then I talked about how I automated my goal-based investing approach in 2022.

I would request the readers to complete the previous articles about my journey so that they can understand how my thought process of investing changes over time.

So, let’s get to my portfolio review of Dec 2022.

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Basics:

Emergency Fund:

  • Savings Account
  • Insta Redemption Liquid Fund (ICICI)

Term Insurance :

  • 10X of annual income when I took
  • HDFC Life – 5X
  • TATA AIA – 5X

Health Insurance:

  • HDFC ERGO – 10L
  • Employer Benefits 

Portfolio Review: Short-Term Goals (up to 5 years):

For short-term goals I use

  • Liquid funds 
  • Money Market funds
  • FDs
  • Conservative Hybrid Fund
  • Ultra Short-Term Fund (for >3 years)

Portfolio Review: Child Education (15 years away):

Equity:Debt = 65:35

This was the toughest job for me. I was stuck at this. But all thanks to the Goal-Based Portfolio Management Course and the Robo Advisory Tool, everything is in autopilot mode now.

In NOV 2022 the ratio was 100% equity. I was Investing only in equity. I had an RD and I put 70% of the matured amount in equity funds.

Later I realized that no matter how far a goal is, one can not just invest in equity and leave the investment to luck. If anything like corona happens during the goal completion year, what will happen to my fund? My hard-earned money deserves better treatment than that.

I need an asset allocation strategy. So, I shifted some funds from equity to debt and added some of my NSC (which will mature in Nov 2023) to make the ratio right. It took me about 3 months to get everything on track as planned.

For Equity, I stopped fresh investment in active funds. Also, chose UTI Low Volatility index fund and ICICI SENSEX index fund to invest in from now on(60:40). 

  • Why not just a simple Nifty 50 index fund, which is the simplest thing to do? Well, I like the concept of this particular factor-based index as it is the simplest of all. Also, the focus is to have low volatility in my portfolio and that’s why I invest 60% of the amount in this index fund.
  • The Remaining 40% I invest in the ICICI SENSEX fund.
  • Mirae asset tax saver fund is more or less like a Sensex index fund with a little downside performance. Also, it has a lock-in, so I have to keep it and treat it as an index hugger.
  • Got rid of the other 2 active funds (Parag flexi + Axis small) and invested in index funds 
  • Yes, I have made some mistakes and that’s why I invested in so many funds for a goal, but it was my learning period. But I have no regrets, at least I tried something. 

For Debt, I was so confused. First, I chose a gilt fund (ICICI) to invest in. Then I thought about having a conservative hybrid fund also. Then I felt that I had 15 years +. So, I can go with PPF. 

  • At last, I opened PPF for my wife. I will also open a minor PPF and invest in it. And I chose an Arbitrage fund for Rebalancing purposes.
  • PPF + Arbitrage – looks simple 
  • The gilt fund is not needed now. Later on, whenever I get a chance I will think about that
  • When the NSC matures, will invest the amount in PPF.

Equity Mutual Fund: (Weight – 65% & XIRR – 9%)

  • UTI Low Volatility Index – weight 60%
  • ICICI SENSEX index – weight 7%
  • Mirae tax saver – weight 33%
  • These are recent investments, so XIRR doesn’t matter 

Debt Instruments : (Weight – 35%)

  • PPF – weight 15%
  • NSC – Weight 65%
  • Arbitrage (Nippon) – Weight 20% – XIRR 5%

15 years to go

  • Present Cost – 30L
  • Inflation – 11%
  • PTRE from equity – 9%
  • PTRE from Debt – 6%
  • Step up – 10%
  • Plan – Reduce the equity AA systematically from the 6th year onwards 
  • Remarks – I am comfortable but I don’t know whether I will be able to pull it off or not as things will keep changing along the journey as my daughter is just less than 2 years old. But I will try my best.

Milestones 

  • The current cost of an undergraduate education matches the current value of your child’s education portfolio ——- Total Portfolio value is enough for a Private Engineering College in Kolkata (I have done engineering in a private college).
  • Debt Portfolio value is enough for General Courses in Kolkata

Daughter Marriage/ Home / Flexible (22 years away):

Equity:Debt = 67:33

Equity – weight 67%

  • Axis Nifty 100 index

Debt – weight 33% 

  • SBI Gilt 

These are recent investments, so XIRR doesn’t matter 

22 years to go

  • Present Cost – 12L
  • Inflation – 8%
  • PTRE from equity – 10%
  • PTRE from Debt – 6%
  • Step up – 10%
  • Plan – I am investing at 67:33 (E:D).
  • Investing pretty much less than required as it’s the least important goal as of now, to get it going.
  • I can change this anytime as it’s flexible.

Portfolio Review: Retirement (29 years away):

Equity Mutual Fund: (Weight – 6%)

  • UTI Nifty – weight 66%
  • UTI Midcap 150 Quality 50 – weight 34%
  • Currently, I am investing – N50: MC150Q50 = 2:1
  • These are recent investments, so XIRR doesn’t matter 

NPS: (Weight – 94% & XIRR – 8.5%)

  • I opted for Moderate Auto choice (HDFC PFM) in June 2022 – Since then XIRR – a 12%
  • Upto 35 years of age – max equity allocation 50% – Rebalancing happens once a year (Birth Date)
  • From 36th years of age, equity will reduce by 2% each year till 55 years of age and it will come down to 10% at 55 years of age 

Why Moderate Auto Choice?

I have around 29 years for this goal. So, I have time. Being a central government employee, NPS is mandatory and is my most disciplined instrument with a great Investing CAGR of more than 10% on average since mid-2016.

  • Also, for a moderate auto choice scheme, I won’t have to do anything, no human intervention.
  • The equity will systematically reduce with yearly Rebalancing.
  • The only risk is that an HDFC (Equity) fund may or may not be able to beat an index fund. But it doesn’t matter to me.
  • For now, my overall NPS is like a balanced hybrid fund and will be a conservative hybrid fund with a gilt majority at later stages. So, I am okay with it.

29 years to go

  • Inflation – 7% before & 6% after
  • PTRE from equity – 10%
  • PTRE from NPS – 8%
  • Step up – 10%
  • Plan – Increase the equity Mutual Fund allocation as per my capabilities.

Milestones 

  • Your Retirement Planning can be set on auto-pilot —— Now it’s on autopilot mode as per calculation in Robo Advisory Tool
  • You can live off Your Net Worth for a certain number of years
    • If you were to retire today the current corpus would last for (years) – 3 years 
    • If you were to retire as intended you would be financially independent for (years) – 5 years 

Others:

My NSC – I tagged it with my education goal and some short-term goals.

My Direct Stock portfolio – I didn’t tag this with any of my goals. It’s still new and I don’t have the confidence to tag this for Goal-Based Investment Planning. Previously, I was investing through Upstox. This year I started to use Zerodha for direct stock investing. My stock portfolio is still an experiment as of now.

Read the Author’s journey here:

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