Investment Blog

I always believed that for successful portfolio management, one cannot just follow the herd and do what everyone else is doing. This requires independent thinking on all the aspects related to investments and not conforming to the popular narrative.

I have always admired fund managers who not only analyse and value businesses properly but also understand the role of cycles and macro-economic factors that determine investment opportunities for future returns (and not just extrapolate past returns or anchor on an old playbook). I have incorporated that philosophy into all investment decisions we make at Truemind.

In a dynamically changing world, where there is no status quo, it’s important to understand major shifts happening beneath the surface. The factors that resulted in decent returns over the past two to three decades are changing rapidly. The new factors will determine tomorrow’s winners and losers.

The role of an investment adviser is to study the factors that worked earlier, what changed and what new factors will shape future returns.

Based on this understanding, we made a few calls which we believe will continue to play out over the next few years due to structural changes in the global economy.

1. Under-allocation to Equity: We have maintained a 50-60% allocation to equity even in aggressive portfolios over the last 4-5 years. Sensex CAGR over the last five years was 5-6%, lower than that of debt funds. The Sensex PE ratios 5 years ago were in the range of 24-25x, which was much higher than the long-term average of 20x. Based on our dynamic asset allocation framework, our equity allocation was in the middle of the range. We have gradually started allocating to Equity from Debt after the recent correction.

2. Allocating to value-oriented portfolios: The time for growth portfolios ended after 2021. When every growth stock becomes very expensive, it’s time to look at value portfolios. The value theme has outperformed growth themes since then.

3. Allocation to Global portfolios: We allocated largely to China-focused funds over the last 3 years, which delivered much higher returns than Indian equity funds during that period. Due to extremely negative PR, China valuations reached multi-decade lows. The second-largest economy, breaking records in many industrial and technological areas and growing at 4-4.5%, deserved better valuations.

4. Debt allocation to short duration portfolios: Despite the dominant narrative over the last many years that interest rates would fall, we believed there was an upside risk to inflation in an uncertain, volatile and highly indebted world. Yields across all debt papers have been rising rapidly, and our allocation to short-term debt portfolios has remained insulated from mark-to-market risks.

5. Gold allocation: All our clients’ portfolios have had a 15-20% allocation to Gold since 2018. We made this call based on excessive money printing. This was followed by Covid, wars and the changing geopolitical landscape, which helped Gold prices. We believe these factors will continue to hold for some time.

Lastly, we started recommending our clients to invest in Global portfolios through the LRS route once Indian MFs stopped taking money in their international funds. This diversification significantly helped maintain global purchasing power in a depreciating INR situation.

We still believe that in this highly uncertain world, a portfolio needs to be diversified across asset classes and across geographies in non-expensive portfolios. That’s the only way to ensure you are not caught up on the wrong side of global upheaval.

At Truemind Capital, we help people achieve peace of mind by managing their financial planning and investments in India and globally diversified portfolios.

For an introductory call, reach out to us at: www.truemindcapital.com