Quoted above is the excerpt from my very first post on this thread. After thinking over more than two years, I have finally reached to conclusion which fundamentally changes the way I view above argument
I always believed in the Mutual Funds but confusion was – 1) what is their role in the portfolio? 2) should mutual fund portfolio and direct equity portfolio influence each other in terms of strategy like mentioned in the above argument or should they be independent in terms of strategy/risk management and finally 3) should I sell all the mutual funds and maintain only direct equity portfolio
Role of mutual funds in the portfolio
Mutual funds are very effective in managing behaviour and imbibing discipline and that is why it is a powerful tool in personal finance. I have realized, for me, attaching FInancial Goal to Mutual Fund SIP is incredibly easy than attaching Personal Finance goals to direct equity portfolio. I am reaching that point in life where I am starting to see medium term financial goals on the horizon unlike few years back when I just had only one thoughtless goal – FIRE
SO…., with above thoughts following are the key decisions
I will not sell mutual fund portfolio and go for 100% direct equity. The allocation of the mutual funds in the portfolio will be influenced by medium term financial goals
I will look Mutual fund portfolio and Direct stock portfolio independently rather than trying to find synergies. That means unlike mentioned in the quoted argument above I will try to construct Direct Equity portfolio having its own risk management rather than depending on Mutual fund portfolio for the risk management
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