The recent market fluctuations and more importantly, the uncertain global situation have got me thinking a lot on how I should treat my investments over next year. Till August, I was reasonably happy with where I had reached in my investment portfolio. My passive income stream was taking care of all my expenses, I had separate allocation for children’s education and my active income was all available for investment. My idea was to keep investing in PPF and MF SIP over the next 8 years or so, when I could join the ranks of retired people.
However, some changes have been necessitated in my earlier thinking due to the following reasons:-
- My passive income stream was dependent on dividend from stocks and MF to the extent of 30 %. This can get reduced significantly if the markets do not recover well in the next year or so.
- The rest of my passive income stream is from rental income, interest from tax-free bonds and capital gains from FMP. These will not be affected by the gyrations of the markets.
- Though I plan to keep investing in MF over next year, I am now clear that markets will both zoom and plummet in this period. SIP mode of investment is therefore not a right way going forward.
- There will be several windows of opportunity to add to my stock portfolio during the next one year. I need to look at this actively by bringing in whatever resources are possible.
- Interest rate cuts will now definitely happen, so investments in FMP etc are less attractive.
In practical terms, these are the actions I am contemplating to execute shortly:-
- Focus more on generating active income to counter the reduced dividend as well as to have more resources for investing in the stock portfolio. So far, I was only looking at assignments that genuinely excited me. For some time one may need to be somewhat more pragmatic.
- Currently I have SIP in 7 funds which are all for a 2 year period. Read about my portfolio here if you are interested. Most of these will be done by October. I plan to reduce my investments to 5 of these after that. I will also make one time investments in periodic manner as I have a feeling that timing the market will be rewarding in the next year.
- When some of my FMP mature, I will use the principal amount to make the above one time purchases in MF.
- Any surplus from my active income (most of it will be), is to be used for investing in stocks. I will mainly be adding to my existing portfolio but there can be some selective additions too.
I see this as a really good opportunity to focus more on the market actively and building up my portfolio further. My strong conviction is that we are in the midst of a secular bull run and investments made in the next one year will have a significant bearing on the long term growth potential of any stock portfolio. My own portfolio had benefited immensely when I took a contrary position in 2008 and 2009, by adding significantly to existing stocks.
While I do not recommend you follow anyone’s investment approach blindly, I will say that the next year will be a good time to add to your portfolio if you are already having one or to start one actively if you are not.
You may want to read the posts I was doing on building a stock portfolio, before I got distracted by the excitement in the markets !! I will try to continue them next week.
Interested readers may pls follow my blog on email by clicking on the relevant button on the right hand panel. I will shortly be stopping the practice of posting the links in different Facebook groups. Following the blog will ensure you get intimated whenever there is a new post.