Typically for corpus of less than 5 Crore, Equities, Debt and Gold are three broad asset classes suitable for investments. Your self-occupied house is not counted as an investment since it does not earn any returns. When your assets increase beyond 5 crore, you can consider Real Estate that you can rent and or sell to earn a return, as an additional asset to diversify your wealth.

If you are investing in Fixed /Recurring Deposit for about 5 years and more, then this is a reasonably good duration to invest in Equity. Investing in Equity will help you to beat inflation and grow your corpus for meeting your long term goals. MoneyWorks4me will help you build your portfolio with quality assets, diversify it and occasionally rotate assets based on upside and downside risk.

The MoneyWorks4me Way of Investing is to designed to ensure an investor reaches his financial goals by staying invested for long and earning a healthy risk-adjusted return.

We are anchored in estimating as best as possible the long term fair value of stocks based on fundamentals and using this knowledge intelligently to get in or move out of equity. This ensures an investor captures reasonable upside as well as protects downside; overall ensuring he doesn’t get out of equity at wrong times. In the end what matters is time spent in the market to compound the capital rather than chasing returns.

We have developed a unique measure Nifty@MRP and Sensex@MRP, which is a hypothetical value of the Nifty/Sensex if all the 50/30 stocks were fairly valued. We have analysed the actual movement of the market vis-à-vis Nifty@MRP and Sensex@MRP for more than 5 years (real time) and back-tested our hypothesis over more than a decade. This has enabled us to confidently assess whether the market is over-valued or under-valued at any point of time.

Based on opportunity we would recommend investing in:

1. Liquid FAAund
2. Index Fund
3. Select Quality Stocks
4. Equity Mutual Funds
5. Gold ETF

Liquid Fund is a category of mutual fund which primarily invests our funds in money market instruments like certificate of deposits, treasury bills, commercial papers and term deposits. Since all the above instruments are very liquid and short term assets, Liquid fund can be redeemed easily. It typically earn close to after-tax Fixed Deposit returns but more tax efficient if held for more than 3 years. Besides, it can redeemed without any penalty/pre-mature closure fee.

An index fund is a type of mutual fund with a portfolio of 50-80 stocks constructed to match or track the market index, such as Nifty 50 or MSCI 80. An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. This product can be used for tactical allocation if not many stocks are available at decent prices, thereby holding a diversified equity. Two popular index funds are listed on exchange R*Shares Nifty BEES & Junior BEES.

An Index construction is done based on free float market capitalization of companies, meaning larger companies would form higher proportion of the index irrespective of their valuation and quality. An Index may correct more in bad times due to poor quality companies or overvalued companies. Second, it may take more time to recover because it may continue to hold poor quality stocks that may not get removed as they would have high free float market capitalization. Besides, just buying and holding an index fund would lead to high volatility. In times of correction, it may scare an investor to move out of equity. Asset allocation between equity and debt would work better as it would reduce volatility in bad times.

You can add Cash every month and Omega will advise to invest in best possible opportunity available at that particular time. This will ensure you invest in asset that would earn some absolute return rather than investing passively in any asset.

If your monthly savings are small compared to portfolio, you can use our lower cost solution SmartSIP and do an SIP in mutual funds till the corpus becomes significant and then add it to Omega Portfolio for better investment outcome.

Equity generate higher than FD returns due to higher underlying risk. Risk means the returns from equity returns could be low or high, or inadequate from time to time versus our expectations. If FD earns 7% pre-tax, equity returns must be much more than FD return to compensate for uncertainty of business/market cycles. Given India’s GDP Growth Rate + Inflation Rate is about 13% CAGR for past several years, this return looks plausible and is good compensation for risk too. A moderate risk can earn slightly better than 13% CAGR returns over long term.