portfolio: Can your portfolio deliver 15-20% returns consistently?


Raveendra Balivada


When Rahul Tewatia single-handedly defeated Kings XI Punjab in Sharjah, it was nothing short of a Cinderella story for an underdog. An underdog who wasn’t able to connect properly in his first 15 balls, took Cottrell for 5 sixes in an over and snatched the victory from the very jaws of defeat. The impact of the innings was such that Michael Slater on the commentary was made to eat his words and he did so very excitedly, stating “from now onwards, I will never ever write off any team, any individual in this beautiful game”. I wanted to write this article just after the match but because of the very nature of the ‘one time’ incidents, I had to hold my horses.

But then it happened again last week. Just when Rajasthan Royals were staring hard at 5th consecutive defeat, their knight (Tewatia) in ‘pink’ shining armor came and blew the ‘very defeat’ away.

Coming to the main topic, a boring one, nevertheless the critical one, can your portfolio do a Tewatia? Can your portfolio deliver 15-20 per cent returns in the last 4-5 years of retirement or need?

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Maybe, but chances of that happening are very less. The 1-year and 3-year rolling return analysis of Nifty 50 shows that getting 15-20 per cent returns consistently is a bit tricky. It might also happen that just before the time of liability, some extraordinary event occurs such as the Asian currency crisis, the dot-com bubble burst, financial crisis, or Covid-19. Your equity portfolio value at such times may even see a drawdown of 20-30 per cent. So, what to do to avoid such situations?

Well, as they say, ‘don’t put all your eggs in one basket’. All one needs to do is manage the asset level allocation. For example, investing in a combination of equity, fixed income and gold not only helps you absorb the shock of drawdowns in the portfolio but also helps you in liability management.

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The analysis shows that asset allocation management proves worthier than investing in equity alone. The 3-year rolling return analysis shows that there have been few instances where the portfolio has yielded negative returns. So, the moral of the story is — while in sports, Tewatia can pull off ‘unbelievable heists’ but when it comes to personal financial investing, the portfolio must reflect the characteristics of ‘Mr. Dependable (Rahul Dravid)’, steady yet unyielding.

(

Raveendra Balivada is Head of Investment Advisers at HDFC Securities. Views are his own)





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