Building Conservative Equity Portfolio

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We are posting this article to help retail investors to build a best conservative portfolio in Indian Equities.  Please note that, the very basic objective of any investment in any field (FDs, RDs, Real estate, Gold, Equities, etc.) is to beat inflation at least, otherwise please note that your investments are actually depreciating over a period of time.  Average inflation in India is 7.55%, so your investments should fetch you annual return of 7.55% and above at least, and that too it should be post tax returns.

Purpose of suggesting below portfolio is to generate annualised returns of 18% and above by staying invested over a long period of time, i.e. with a time horizon of 5 to 15 years and more.  The best way to build this portfolio is by keep investing in below mentioned ETFs (Exchange Traded Funds) in Systematic Investment mode (SIP).  i.e. say you have a savings of Rs.10,000/- per month and you would like to invest Rs.5,000/- per month into Equities as part of your asset allocation.  The best way is to keep investing this Rs.5000/- month on month into below suggested portfolio for a long term.

If you can learn some simple techniques of Technical Analysis and can time the market then you can easily get 24% annualised returns.  Well on top of this, you can also use this portfolio to make regular income by applying few simple Options Trading Strategies.  Please do contact us if you are interested to learn such simple techniques and strategies to enhance the returns on your investments.


Above allocation means, out of every 1 rupee you are invest, 60 paise will be invested into 50 stocks of NIFTY basket, 25 paise will be invested into 100 stocks of Midcap index and remaining 15 paise will be invested into 50 mid and small caps of Junior NIFTY index.  So, your money is well diversified and risk is well mitigated.  Also, very importantly please note that returns you take it out from Equity Stocks / ETFs after 1 year of your investment are ABSOLUTELY TAX FREE.  Also, dividends out of these investments are also TAX FREE, so what more a conservative investor can ask for!!

Equity markets, even SENSEX as Index (or NIFTY) has given 18% of annualised return for long term investors, and if you reinvest your dividends into above portfolio then you will get much better compounded returns.  The below picture shows the reality of returns from different asset classes in India.

What is an ETF?

An Exchange Traded Fund (ETF) is like a mutual fund that tracks an index, a commodity or a basket of assets, but trades like a stock on a stock exchange. In short you can BUY or SELL an ETF like a Stock if you have a demat + trading account.  So, it gives an advantage of buying an ETF during market hours at a price you want unlike a mutual fund where you buy based on NAV that too after close of market hours.  Other advantages are a) ETFs annual maintenance charges are as low as 0.3 to 0.5% whereas mutual fund charges are 2 to 2.5% + entry/exit loads, b) unlike mutual funds your returns are not dependent on performance of fund manager but just gives returns based on broad market performance, i.e. based on performance of SENSEX, NIFTY, MIDCAP index, etc.  It may be slightly difficult to have long term outlook on individual stocks and track them, but its not difficult to have an outlook on overall markets that too for a long term.

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