You won’t need fixed deposits after reading this.

Are you a risk averse investor?

Well who likes to lose his hard earn money in market downtrend. 

But downtrends are integral part of stock market and despite all these downtrends market returns has beaten all other fixed return financial instruments by handsome margin on any 5 year rolling return basis. When it comes to investments the biggest risk in life is not to take risk at all. So, the need of the hour is not to reduce risk to 0 but to manage it to such a level that it does not becomes a speed breaker in the way of your wealth creation Journey.

Let’s take any equity Mutual Fund and check it’s returns over last five year. You will be surprised that even below average Mutual Fund has given much higher return then fixed deposits. If you consider good mutual funds the gap will be much wider. If you check the returns on 10 years basis the gap will widen further. This is a price we pay for not taking risk at all. One may argue that although the returns in most equity-based products is more over a longer period of time than fixed deposits, the journey is never smooth. There may be times when your portfolio is down by 20-25% which may give you stress. This is one issue which we have tried to address in this post. We have designed a portfolio which should generate 3-4 times the return of any fixed deposit on an average per annum at a risk level which is below Sensex and only slightly above debt mutual funds. This means that volatility will be much lower. In addition to this you should expect 1-2% of dividend income every year which is over and above the wealth you will create due to price change.  The portfolio needs minimal review and this should be done once a year.

1 SANOFI
2 HUL
3 Britannia
4 ITC
5 HDFC bank
6 Dabur
7 Infosys
8 PIDILITIND
9 M&M
10 Nestle
11 RBLBank
12 RELIANCE
13 Marico
14 GLAXO
15 TCS

The portfolio is different from our super safe portfolio which requires review after every 2 weeks and generates much higher returns. I repeat the portfolio is not completely risk free but the risk is well managed without compromising with returns with the help of data science technique and is well below most other equity based financial instruments. Having said that, fixed deposit can be preferred  when you need the money within 6 months of investment date. All the chosen stocks are of high quality and least impacted with global market fluctuations. They have solid fundamentals however most of them are not undervalued but fairly valued so one need to review the portfolio once a year. The article is written for your information purpose only and should not be taken as investment advice. Consult your financial advisor before making any investment decision.

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