Posts tagged with "rebalance"
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A Confusing Time In Stock Market
The Indian stock market has been unrelenting in its growth. It feels like yesterday when I wrote that Sensex crossed the 60,000 milestone. Now, just 2 years later it is about to cross 70,000. But there is nothing impressive about it because that is a relatively low growth rate of 8%. Hardly anything to write about since we expect markets to do at least double digit growth. What is really impressive is that the market doubled in just three and a half years, which is a solid 22% growth. In June 2020, Sensex was around 35,000. The long term Sensex returns are around 13-14%. So should we be worried about a market crash?
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Should You Sell Debt Or Equity For Retirement Expenses
After reading my post on “withdrawal plan in retirement”, one reader asked why I suggested that one should sell debt mutual funds to handle the retirement expenses. In that post I gave an example where an investor has only debt and equity mutual funds and in that scenario, it is preferable to sell debt mutual funds to handle everyday expenses and then do a rebalance once in a while to get the asset allocation to the ratio that you prefer. The reason for this recommendation is quite simple. It is to avoid selling mutual fund units of an asset class at their low point. Since equity mutual funds go up and down quite a bit in value, it is possible that in some years you might sell at a low point and dent your compounding effect. I will explain how with an example.
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Withdrawal Plan In Retirement
After my post on lumpsum vs SIP investment, a reader asked – “Wanted to understand the other side - how to redeem from our funds after we retire? Say we have calculated the number and we have enough. But, the challenge is how to get to a withdrawal mode from accumulation mode. You have showcased how you do it in some articles but can you do it with some numbers for a fictitious person? Ex: Age 40. Amount 6Cr spread across multiple equity and debt funds and US Stocks. Now, how to withdraw to last till their age of 85 for an expense of 1L per month (corpus is 50 times)?”. I thought it is an interesting question that needs answering. I will go with the numbers given by the reader and work out an example in this post.
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Lumpsum vs SIP
Is it better to do a lumpsum investment or do systematic investment? Like many things in life, the answer is – it depends. There is usually no one good answer. But taking some examples we can see which works better in what situation. Of course these are just my opinions and they may not apply to your situation. Also, there may be many other cases which I do not cover. Finally, remember that whether you do lumpsum or SIP, in the long run the difference in returns will usually be miniscule unless you time the lumpsums very badly. With that out of the way, lets get to some examples.
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Reducing My Asset Allocation Swings
Ever since I started investing back in 2011, I have always wanted to do tactical asset allocation. The idea was not to maximize returns, but to minimize volatility. Tactical asset allocation is different from the general advice which you receive from many people including me which is to keep a fixed asset allocation and rebalance once in a while to make sure that the asset allocation difference remains within a small range. That advice applies for any long term goal like retirement. For shorter goals you may receive advice to reduce equity allocation as you near the goal. If I did not make any sense there, then let me explain with an example.
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Follow-up to Virtual Meetup #7
Thank you to everyone who joined the virtual meetup #7. We had a very low turn-up but we certainly had a lot of questions. This post is a follow-up to that meeting so you know what we discussed. As it usually happens, the topics we covered varied quite a bit from investment related things to solar panels to taxes.
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Sensex Touched 60,000. What Should I Do Now?
I never imagined that BSE Sensex (Bombay Stock Exchange Sensitive Index) would touch 60,000 so soon! Especially given the uncertainty due to COVID-19 pandemic. It took just 8 months to go from 50,000 to 60,000. Which is a 20% gain in that short duration. We have all heard of stock markets giving great returns, but this one is special because it is happening at a time when economic situation isn’t that great and we are still fighting a virus without cure. Oh well. Markets will do what they do best – surprise everyone. So what should an investor do in such a situation? My response may not give the answers you are looking for, but that doesn’t stop me from writing now will it?
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Sensex and Nifty Up More Than 35%
I wrote a post less than three months ago that Sensex and Nifty have fallen more than 30%. It is only fair that I should write a post when the indices have gone up. This time, they have gone up by more than 35%! The unfortunate thing is that I have no idea why. But hopefully your investments are up and probably in the green zone. Of course neither indices (thankfully) have not reached their historic highs.
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Sensex and Nifty Down by 30%
At close today, both Sensex and Nifty are down by 30%. We are officially in bear territory. It is considered a bear market if the market has fallen more than 20% from the recent highs and the investor sentiment is negative. Some market pundits are predicting that there is going to be a recession worse than the 2008 crisis. I have no idea if that will happen, but I am not worried at all. Also I cannot predict market, so I can't even tell if they are correct or not. But I have a plan.
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