My Capital Distribution Strategy
My capital distribution strategy is focused towards investing. This strategy is something that gives me comfort and the freedom to work in the markets without worrying too much.
Let’s say I have 1 crore rupees to start with. That is 100% of the capital. The whole of this capital goes into the ‘Core Portfolio' which is based on my own research and the research we do at MoneyCraft (SEBI RIA). This therefore, makes sure that I stay invested in the markets for the long term while having a very focused approach towards investing.
Top 20 companies in this portfolio are always commanding 85% of the portfolio. Not only this, but I have noticed that Top 5 Companies in the portfolio are always commanding 30%+ of the portfolio. I've never had more than 35 companies in this portfolio. There is hardly any selling and this is my primary source of wealth creation.
Only when that 1 crore is deployed, I start thinking about other things. Over and above that 100%. The next 10% (10 lacs for reference) is deployed in Short Term Positional Trading.
Another 10% is deployed after that in Long Term Trading (this helps in picking up companies like 3M India, Tata motors DVR, etc.). Initially I did not think of adding this to the strategy but I realized I needed to have those long-term picks if I wanted to take advantage of Charts, etc. even when these companies could never fit in the Core Portfolio.
Next 10% cash goes towards savings (Gold, Bonds, FDs, etc.).
Now, having deployed 130% of the portfolio, I come to the ‘Playful Portfolio’ (I might get it trademarked 😉). This is a very important part in the portfolio as it has made sure that I do not take unnecessary risks. Having been in the markets for 8 years, I have seen enough wealth creators and destroyers. More Wealth is destroyed by playing those ‘turnaround’ stories and by picking partially researched companies in anticipation of short-term quick gains. Therefore, I needed some allocation where I could do all this but still not disturb my Core Investing and wealth creation effort. Also having studied Behavioral Finance and Human psychology when it comes to money and markets over the last 1 year in great depth, I realized that we need to accept the loopholes of our minds as that is what makes us humans 😊 So, I created the Playful Portfolio which would help me pick anything and everything that my mind wants to. This Playful Portfolio is also the Bad Bank for my portfolio and since it is a very risky capital, I have included International Investing in this as well. The allocation for this is 3%. Yes, just 3 lacs in a total strategy of 1 crore and 33 lacs. Thus, you can see that how little impact this will have if it goes bust. Also, since it is the bad bank and holds my international investing allocation as well. You can say that only 1% is empty to pick anything and everything. Currently I have few unsold shares of Yes Bank in Bad Bank, I have picked up ARKW ETF in International Investing and the last big pick to play a trend on no research of my own was Kilpest.
This is therefore, my 133% capital distribution strategy. I currently do not do active F&O trading.
Even if you consider this as a whole, it maintains 100% (Core Portfolio) + 10% (Long Term Trading) in invested amount. Dividing 110/133 we get ~83% therefore, most of the capital is always invested in actively tracked long term investing.
My goal with this strategy is to:
1) Keep at least 80% of my money invested as this is what is going to create long term wealth.
2) Have money and allocation freedom to pursue different strategies as per my needs.
3) Include Long Term Trading picks (3-5 years) while trusting the charts.
4) Having the freedom to let my mind play its loopholes while not impacting my portfolio.
5) Have the chance to pick International Equities.
6) Have Savings on my hand (10% is pure savings and 10% of Short-term trading can be squared off immediately to support any urgent cash requirement)
7) Having a bad bank makes sure that I do not dampen my returns due to 1 bad investment. The damage that can be done by constantly seeing that 1 stock go off in the portfolio is much greater than the actual financial damage. I've had only 1 major blowup in my investing journey till now and that was DHFL. Thanks to that it made me re-think a lot about my investing and hence become a better and more serious investor.
I hope this can give you some idea and insights into my style of Investing. Hoping to have contributed something new and insightful with my 133% Capital Distribution Model.