Author: Randomwalk

Last couple of months saw lot new and interesting loans and products been launched by few platforms.A brief over view on those products

I2I Funding group Loans:

The product is interesting as the yield is quite high and there are multiple guarantor. Due to cross guarantee I will consider it less riskier than single borrower loan for a similar risk profile.

To make the most out of this loan it makes to invest in each member of the group. Another positive is that borrower are women and historically delinquency is generally lower for women compared to men.

I2IFunding Invoice Discounted Loans:

i2iFunding has partnered with Oxigen to provide loan against the amount debited by NPCI from the Micro ATM customer. This amount is settled by NPCI in next 1 to 2 days in Oxigen account. Oxigen will recover the loan amount before settling it further into borrower’s bank account.

This loan is similar to settlement finance loans on TradeCred. The yield is also similar. This loan suit those people who wish to invest only smaller amount else they can choose either TradeCred or Faircent Micro ATM loans instead

A slightly higher risk category with higher yield for invoice discounting is loan against farm product invoices

i2iFunding has partnered with a third party to provide loan against invoices to Fruit farmers and vendors. Company which purchases the fruits will be guarantor in the loans and will make the repayment directly in i2iFunding’s escrow account on behalf of the borrower. As tenor is very low (20 days) if the defaults are close to zero then only it makes good sense to invest here and people should start with small capital.

TradeCred GST discounted Invoices:

This is a new product launched by Tradecred. Above is an example of one such deal. In this kind of setup a vendor has multiple enterprises for which it is providing service( Servify in this example which provides after sales service in multiple category).

The GST invoices are used to see history of transaction with various enterprises ( which are mostly blue chip).

Advantage of this over single enterprise is that your 3 lakh gets distributed amoung multiple enterprises instead of one and vendor will find it easier to pay you if even one defaults. Thus

1) your max exposure to one enterprise is lower

2) vendor does not have a big amount to pay incase of default and hence lower risk of vendor not being able to make up for enterprise default.

If you are very confident of the enterprise then go for normal deal but if you want more conservative trade and want to protect portfolio from black swan event,multiple enterprise is a good option

P2P Portfolio Composition for November

Portfolio Changes:

• Adding new investments to RupeeCircle
• Exploring lower risk loans in I2I( NBFC guarantor, Education Loans, Pool Loans) as initially I had lot of D and E category loans in my portfolio
• Adding new investment Faircent consumer loans (Pooled)

Portfolio Performance

Performance Analysis:

Key Points from this month’s performance are:

• LendenClub: After discontinuation of Insta Loans my yield has slightly gone up . I will stick to the strategy of investing in only 12 months plus loans. Will not add any new investment
•  I2IFunding : My yield has stabilized around 15% and now I will start experimenting with different kind of loans. Recently started pool loans!
• RupeeCircle : Robust performance continues.As minimum ticket is 5k here this platform is advisable only if you have more than 1lakh to invest
• FinancePeer : Fewer loans in last few days but overall NPA still zero
• OMLP2P : The yield has started dropping due to idle money in account as very few new opportunities
• Cashkumar: Not a good platform if you want to put more than 70-80k as limited loans
• Faircent Pool Loans: Investing in consumer loans (pool loans) . It’s a good product if return expectation is around 13%.

Invoice Discounting and Settlement Finance Performance:

I keep rolling my invoice discount investments. Invoices Invested till now

• Amazon
• Flipkart
• Future Enterprise
• Paytm
• Instakart
• Hiveloop
• Blackbuck
• Cloudtail

I have also invested in Settlement Finance which has daily settlement against Aadhar ATM invoice using TradeCred.

Off late few invoices are raised by vendors which they raise against multiple enterprises thus it diversifies risk of one entity default with multiple low correlated entities who are vetted based on past record with the vendor.

Examples of these are generally logistics companies like :

Blackbuck, Rivago and Deliphery

My current Portfolio yield and duration:

Footnote:

For buying zero cost MF and lowest Derivative Trading

Zerodha Referral

For alternate investment you can use these links

Faircent Referral

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Invoice Discounting Platform TradeCred Link:

https://buy.tradecred.com/onboarding/apply-now/TC0152

For other Invoice discounting platform ping me on 9967974993 or mail me on rohanrautela9@gmail.com

I have covered various high yielding assets which can be used in the portfolio to enhance returns. Most people do not know that they can use their existing long term stock or ETF holding to generate yield. One of the easiest strategy is called Buy Write.

This is a good strategy for people who think market have really heated up and they don’t expect a major bull run in next 6 -7 months .They are happy with a good 1.5% monthly income on the portfolio with some downside protection.

What is a Buy-Write Strategy?

Buy-write strategies, also known as covered calls, involve buying a stock (or ETF) and selling a call option with a strike price generally at or above the current price of the stock. If the stock price rises above the strike you are able to cover the option with the stock you own; if the stock price decreases or stays flat, the option expires worthless. Either way, you get to keep the option premium, which provides a source of income and leads to reduced volatility relative to owning just the stock.

Now lot of people get scared thinking of options as a nuisance. The truth is people lose money not because of the option structure but because of the leverage.

If we take the example of Nifty. One call option has lot size of 75. Which means if I buy a 12000 Strike CE my total exposure is 12000*75 = 900,000 INR. Therefor by using one option you can take lot of exposure ,hence if you take too much exposure you can lose or gain a lot!

If we take calculated exposure and create a strategy in line with our goal ,risk is minimal!

A Simplified Analysis of Buy-Write Strategy

To understand how these strategies work, let’s look at a simple buy-write strategy on the NIFTY 50 Index. In our portfolio, we will hold shares of Nifty and an equal amount of short call options.

So let’s say I have 900,000 worth of NIFTY ETF( 12000* 75= 1 lot of call option exposure at current Nifty value) in my portfolio or some large cap Nifty Mutual Fund of that amount. I will write one option every month

To simplify things further, we will consider market base as 10000 Nifty for the strategy. We will price the call options using the Black-Scholes formula with the Historical IV as an estimate of the volatility and the risk-free interest rate and NIFTY dividend yield.  We will rollover the call options every month. On that day, we settle any currently outstanding call options and sell a new one-month call option. Selling the option generates a premium payment but does not change the portfolio value since we are now short the option. The proceeds from the sale are invested in high yield debt .Any P&L at the end of the month will be settled using a cash reserve we will maintain.

eg if we have 9 Lakh of Nifty 50 ETF .We sell a december 10000 call option. Premium would be approx 1.5% i.e

Three things can happen .

1. Market stays around 10000
2. Market crosses 10200
3. Market goes below 9800

• Market stays at 10000. You make 1.5-1.9% monthly premium( around 18000 INR which you can invest in high yield assets)
• Market goes to 10200 . You make 150 point through premium. You lose 50 rs in call option .you make 200 points in Mutual fund(approx). In totality you made 150 points (50 points lower than if you had only MF)
• Market goes to 9800 . You make 150 points in premium. You lose 200 points in Mutual Fund. In total you lose just 50 points compared to 200 points in only MF position.

This would have given you an idea. In choppy market you make good monthly income. In bull market you make less than “Only MF position”. In bear market you save some downside!

Now if I do this strategy monthly how will I fare in various market? I will also compare it with selling Quarterly options also instead of Monthly(3 month maturity)

In the Bull scenario market goes up 15% while in bear market drops 8% in a year while in volatile market stays flat.

Volatile Market Buy Write Performance:

The Dashed line is the option premium. The Blue bars are underlying returns each month. It is evident that in only 2 scenario you ended up paying more than the option premium. In many months you pocketed full premium when underlying performance less than zero.

Total Return = Option Premium of 12 Months + Underlying Index P&L – short call option loss

= 23%+ 0%-13% =10% ( As market was choppy option were expensive and we got good premium selling it.

In total we made around 10% + dividend from underlying which is not bad for a year when our MF dint give any return.

If we would have sold quarterly Options:

None of the quarter had higher returns then our premium .

Total Return = 13.4% -2% +0% =11.4%

It seems that quarterly strategy was more successful but the reason for that was the market was really very choppy and even though it dint move much over quarterly period( total premium is more in monthly but Index losses also high)

Similar Strategy for other markets will yield these results:

I have added one more scenario when Index moved 30% in a year to show this strategy will trail broad market in a one sided bull market!

Let’s see how this strategy would have done in last 6 months which were pretty much volatile:

I have taken option and Index data from 29th May 2019 to 30th Oct and will cover 5 monthly options

Market was 2 % down for the period and was very volatile.

Let’s See the Option Premium we accumulated and losses we made in selling call options.

Option Premium for At the Money monthly options:

2019-05-30 197.95

2019-06-27 215.8

2019-07-25 170.35

2019-08-29 215.55

2019-09-26 399.45

Total Premium collected = 1200

Loss on short Option Position =

  2019-05-30    0

  2019-06-27    0
  
  2019-07-25    0
  
  2019-08-29    -621
  2019-09-26    -18

Market went down for the first 3 months suddenly spiked (After Tax Waiver was announced).

In total we made 560 points after factoring in the loss due to short option position.

Total Return = Option Premium – Option Loss + Index performance = 2.9%

So we made 2.9% in the month compared to loss of -2.2% of the underlying Index. Hence our strategy beat Index by 5.1% in 5 months which is a significant out performance!

Benefit: There are 2 major benefit of this strategy

• Income generation in choppy and uncertain market scenario
• Tax Benefit

One of the biggest benefit of this strategy is that you can offset all your losses in option Trading against any gains other than salary which means:

• Offset against short term capital gain (Debt and Equity)
• Long Term capital gain
• Alternate Investment gain(P2P,invoice Discounting,REIT)
• FD and saving bank Interest gains

Eg: if you made 50,000 loss in the financial year on your option Portfolio and your interest income for taxation is 60000 you can offset 50000 loss against it which means 15000 benefit in Tax!! You can carry forward loss to 8 years!

How to do it ?

Zerodha provides the perfect platform for it. In Zerodha you can buy Direct Mutual Funds for Free

Direct Mutual Funds Zerodha

You can buy ETF at zero brokerage cost

Buy ETF on Zerodha

Now you can collateralize those ETF or a part of it which can be used as margin for Trading for just 60 bucks!

Converting long term Holding to Margin Collateral

setting up an account on zerodha is cheap and easy. You can use the link:

Zerodha Referral

Buying and Selling Options is super easy:

Conclusion: This is one of the many strategy which can be used by investors to generate yield from their holdings. If you understand the rationale of doing it you will be happy with the outcome. When you become better at understanding mechanism of options you can implement more strategies using the long term holding collateral and generate more yield.

Eg selling Call Spreads , Put spreads, Iron Condor etc.

It’s important you start with the easy strategy and then gradually implement more complicated ones.

In USA you have many ETF embedded with this strategy

https://www.zacks.com/stock/news/295606/buywrite-etfs-for-a-topsyturvy-market

Footnotes:

To setup account on zerodha for low cost trading use

Zerodha Referral

For alternate investment in P2P and Invoice Discounting you can use these links

Faircent Referral

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link OMLP2P

FinancePeer (Use Code MNJ6547)

Invoice Discounting Platform TradeCred Link:

https://buy.tradecred.com/onboarding/apply-now/TC0152

For other Invoice discounting platform ping me on 9967974993 or mail me on rohanrautela9@gmail.com

This month I have added a new product available on Faircent. The new pool loans seems to be a good proposition and I thought I will give it a try . I would be investing only in pool loans in Faircent. Before I publish my performance I am briefly reviewing the some interesting loans available on various platforms with brief analysis

Portfolio Composition for October

Portfolio Changes:

• Primarily sticking to the 3 platforms like last month: I2IFunding , RupeeCircle and FinancePeer.(Good quality loans, high volume of loans)
• I am only reinvesting EMI in these 3: LendenClub, OMLP2P and Cashkumar. Primary reason is that number of borrowers are too few to invest more money
• Faircent has recently started few pool loan product where I have started investing recently . 

Portfolio Performance

Performance Analysis:

Key Points from this month’s performance are:

• LendenClub: I have decided to totally discontinue Insta loan. Reason is that the interest I get is around 40 bucks in 3 months for 500 investment in InstaLoans. Even if 1 out of 13 default(7.7%) I am in loss, this makes it very sensitive to the underwriting and instaloans by nature are risky. I will continue to reinvest in long dated loans with preference to existing borrower
•  I2IFunding : I2Ifunding performance seems to be good but one thing I noted was that loans backed by NBFC(15%) are almost as good as my portfolio return(Approx 15%). It means I did not generate extra return by active management(I could have just invested in NBFC backed loans). If I see the granular performance I realise most of my defaults are in my early investments( working capital loans, High Ticket size etc) . Platform underwriting has improved over time and also my own skills.In next 6 months I expect my yield to rise by 1% approximately
• RupeeCircle :Great performance continues. One loan is in 40 days delay so I have booked 50%of the outstanding principal as NPA as conservative measure. I am concentrating on people with decent salary, High account balance and low EMI to salary ratio
• FinancePeer : Education Loan investment has been pretty successful with zero defaults till now.Interestingly they have tie up with institutes which will refund money in certain cases of borrower defaults
• OMLP2P : The performance is good but with only 1-2 loans in a week I dont see much investment opportunity as of now
• Cashkumar: Same problem.Not many loans and they disappear really fast. Cash lying idle!
• Faircent Pool Loans

Faircent has recently started some pool Loans .Advantage of pool loan is that it provides instant diversification and is great for people who are starting(it’s like the ETF of p2p loans) ,have less capital,or who don’t have much time for due dilligence.

3 categories seem interesting

• Consumer Loan
• Education Loans
• Micro ATM loans

Consumer Loans:

Tie up with NBFC (zest Money) which will provide  pool loan to borrowers for items they bought from their partners The funds invested in this group product will be used to fund borrowers who wish to convert their purchases into EMIs .They will take care of  defaults (in a way charging insurance fees and pay you fixed 14%).After fees you would make 13%

MicroATM Loans:

Through partner organizations faircent in enabling merchants offering AEPS/Micro ATM services to receive instant settlements in their wallets. The AEPS/micro ATM transactions get stuck in banking system for couple of days, this creates a working capital shortfall for small merchants. Through this facility merchants will get instant settlement in their wallet (as a loan), the loan gets repaid once bank settles the transaction. Almost like Settlement Finance but without invoice collateral(Merchant are vetted instead to check credit profile).The tie up is with a payment aggregator called Oxigen

Minimum amount is 10k and you should expect 12% fixed. It’s good alternative for people who can’t invest 50k in settlement Finance

Education Loan:Faircent in association with different partners have launched education loan product. The funds invested in the pool will be directly disbursed to educational institutes/ Partners. Incase of  defaults the partner will ensure that money is retrieved from the institute .They will pass on 14% interest rate taking care of defaults

Pool Loan vs Conventional Loans

Invoice Discounting and Settlement Finance Performance:

I keep rolling my invoice discount investments. Invoices Invested till now

• Amazon
• Flipkart
• Future Enterprise
• Paytm

I have also invested in Settlement Finance which has daily settlement against Aadhar ATM invoice using TradeCred.

While In Invoice Discounting I invest in short duration invoices of Bluechip companies, in settlement Finance credit card or Aadhar Payment invoice which is paid T+1 day is financed for a day hence it’s an ultra short invoicing.

My current Portfolio yield and duration:

My Yield has gone up during the diwali week as lot of vendors were providing high interest rates to avail loans due to rising sales during diwali week which require more working capital

Footnote:

For alternate investment you can use these links

Faircent Referral

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Invoice Discounting Platform TradeCred Link:

https://buy.tradecred.com/onboarding/apply-now/TC0152

For other Invoice discounting platform ping me on 9967974993 or mail me on rohanrautela9@gmail.com

Most retail investors invest in stocks , bonds and real estate as a part of their asset allocation.Though stocks and real estate are one of the primary driver of growing economy it leaves the allocation of a common man in the mercy of market movement and Real estate prices which by nature are very volatile.Most common portfolio I have seen is :

• Equity Mutual Funds
• Debt Mutual Funds
• Flat ( for which EMI is being paid)

Lot of people argue that everything tanks to zero they will still have a home to live in, which is not a great argument as failing to may EMI will cause forfeiture of possession!

For instance if someone has 30 lakh corpus generally 10 Lakh is invested in Debt ,20 lakh in equity and they have a flat worth approx 50 lakhs for which they pay EMI

This is an example of leveraged portfolio. People keep changing the weight of equity and debt but the elephant in the room is the Flat.

They are paying around 9% per annum on 150% of their networth which is equivalent to 13.5% of their networth . Every year the real estate does not move up they lose 13.5% of their networth !!

It’s alarming but people do not realize because they cannot see profit and loss on real estate as it does not have any mark to market value.

Also people have inflow of salary etc which makes them overlook the loss!

Now let’s see asset allocation of some top University of the world (Yale)

Endowments invest like many other institutional players as well as ultra Rich. They target income to fund their operations/lifestyles indefinitely and overall growth in the corpus.

If you could get a predictable return from your investment then you can tie rest of your networth to long term assets without worrying about volatility. Once you build a large enough financial corpus, small percentages make a big difference.

Yale University also boasts one of the nation’s largest endowments led by David F. Swensen, PhD. Yale University has more ~$30 billion endowment fund which it invest across multiple asset classes.

US Endowment Funds have consistently achieved superior investment returns. This is especially the case for the “Super Endowments” of Harvard and Yale. They have achieved an average 20 year annualised return of 11.5 per cent, 5.4 per cent greater than the returns of a traditional 60/40 global equity/ bond portfolio . US Endowment Funds have diverse portfolios with exposure to multiple asset classes including significant exposure to alternative asset classes.

Yale’s endowment returned 11.4% per annum over the 20 years ending June 30, 2019, exceeding broad market results for domestic stocks, which returned 6.4% annually, and for domestic bonds, which returned 4.9% annually. Relative to the estimated 6.5% average return of college and university endowments, over the past 20 years Yale’s investment performance added $28.6 billion of value in the form of increased spending and enhanced endowment value. During the 20-year period, the endowment grew from $7.2 billion to $30.3 billion.

I find it amazing that Yale’s domestic equity and fixed income only account for less than 10% of their overall portfolio. Most of us won’t have such diversification because we don’t have the resources or the expertise in investing in so many different asset classes. But I do strongly recommend following a asset allocation proper  that incorporates real estate and alternatives as part of your net worth.

How can a Retail Investor Allocate?

We got an overview of how wealthy institutions and high net worth individuals invest their money so the rest of us can make better investment decisions. Many time people have a very negative view of alternative investments from people who’ve never invested in alternatives before. It’s as if we automatically attack what we don’t understand. You should keep an open mind with a focus on learning new things.We need to assess each alternative for it’s pros and cons and then invest after under understanding the details!. There’s a reason why the rich are rich and tend to stay rich!

With the advent of better technology lot of asset classes which were not available few years back are now within reach of most people. If we make asset allocation as basis for our investment decision we can invest more prudently and not over-allocate towards property just because our primary home tends to be so much more valuable than all our other investments. I keep looking for newer assets and platform which can provide decent and sustainable returns.

Footnotes:

For alternate investment you can use these links

I2I Referral Link

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Mail me to get Cashkumar Referral

Invoice Discounting Platform TradeCred Link:

https://buy.tradecred.com/onboarding/apply-now/TC0152

For other Invoice discounting platform ping me on 9967974993 or mail me on rohanrautela9@gmail.com

How many of us are always scared of losing our job while a huge mortgage is hanging like a sword of damocles over our head.

One of the main purpose of investing is to achieve a decent corpus which can help us to be financially Independent. Lot of people in pursuit of this invest based on retirement goals. Theoretically it sounds like a good plan but there are lot of practical shortcoming in it.

One important mistake people make is they think Financial independence is a binary process and on a certain date they will have a certain amount in their bank account and get an epiphany to quit their job. Alas it’s not how it happens in reality as our expense keep changing throughout our life and it’s impossible to plan 15 years in advance .Also until we have enough passive income to pay our expenses retiring is a sweet dream

How many of us had imagined what we are doing today 10 years back. Maybe some of us who had impeccable foresight but not the majority.

So how do we go about planning our Financial Independence?We will realize how important asset allocation is in this process!

3 most important things which will be the primary driver in this are:

• At what Rate we grow our earning
• How much we Save
• How fast we replace our active Earning with passive Earning.

The first point depends on growing yourself which is beyond the scope of investment advice.

Saving is more important than investment. A penny saved is a penny earned.How being cognizant about your savings can drastically improve your chances of early financial freedom can be understood in detail from this article.Insurance(both health and Life are a must)

Optimisation of Investment

When we have replaced all our money requirement through passive income is the day when we would be 100% independent.

So instead of categorizing ourselves as Independent or Not we will assess what percentage of Independence we have achieved!

I will illustrate it with example :

For our Calculations I will assume that the person is 35 years old ,Earning around 20 Lakhs per annum after tax and say 30000 PF every month and has amassed a corpus of 30 lakh by now.

People can use this as a benchmark and change the numbers based on their current status.

Scenario I : Conventional Goal Based Approach

The issue with goal based approach is that we use our knowledge of historical performance of mutual funds and put the number say 13% in our calculation.

The number is the average performance of the stock market when it is held for a very long time. It implies that there would be years of large draw downs and years of extraordinary gains.

We can not use this corpus to offset our liability in short period. There is always a mismatch between our Equity investment Tenor and our immediate monthly requirement for which we use active income to support

One thing people need to understand is that when they invest in SIP that each SIP is like a cashflow and each cashflow should atleast stay invested for 10 years to get close to historical average. It means that if you stop your sip by 40 years of age then by 45-50 age you should expect 10% Returns with a given confidence.

To understand volatility of Mutual Funds Read:

https://qr.ae/TW23fd

In our example we assume that out of 30 Lakh , he has put 24 Lakh in Equity MF and Rest in debt

I have calculated the Financial Independence Ratio

= Current interest Income/Current Liability

It means the money which I get from debt income and saving account ,which can be used immediately for offsetting my expenses and hence provide me independence

Now fastforward 5 years later. We assume the person invest 50% in debt and 50% in equity, salary remains same(hypothetical) and inflation stays 5% for the period.

As we can see in an optimistic scenario Equity gave 13% return and we ended up with 2.1 Cr. But in pessimistic Equity dint give return in the short run and we ended up with 1.3 Cr.

Though in the long run our equity will catch up but at this point our interest income can only offset 54% of our liability and we are nowhere near being Financially Independent.

Selecting Mutual Funds

https://qr.ae/TW2Bta

Scenario II: Offsetting Liability Base Approach

In this approach we put a part of money in Equity based products for long term capital appreciation and a part in alternate income generating assets to offset our liabilities and make us financially independent.

We take the same example as in our last approach

I have assumed my alternate will give me 12% interest. Historically my alternate portfolio has given north of 13% but I would prefer to take a more conservative approach.

To check out my alternate investment Portfolio read this:

P2P Portfolio Analysis(Sep)

2 things are evident:

• We have higher Independence ratio at 24%
• We have more liquid portfolio

Still we are a long way off from reaching full independence. Now 5 years later how will the portfolio look.

In 5 years we invested 50% of salary in alternate and rest in Equity MF.

In optimistic scenario as well as in the pessimistic we are better off than first scenario.

At 114% we are financially independent. Which implies that even without our current active salary we can manage through our interest income for months ,even years or we can pursue new opportunities even at lower income without the fear of meeting our day to day expenses.

Though the intention is not to be jobless but to have the peace that we can survive without a job for long duration! Offcourse if we just stop working or inflation will gradually wipe away our gains in the long run.

Actually this is the way how lot of NBFC make money, by giving retail loans, invoice discounting etc. They are highly leveraged hence they make more money ( also take much more risk).

Why does Alternate Investment provide higher Return than normal debt Funds?

The reason is most companies which raise money through debt are NBFC eg: HDFC , Bajaj Finance, Tata Capital etc.

They take money from you and pay 8-9% and lend it to either retail borrower or corporate borrower at 15-20% and profit from the difference.

With the rise of fintech we have eliminated the mid party(NBFC) and thus can get access to the end clients. If we manage diversification astutely it can become a great source of income

How much to put in Alternate Investment?

As a crude ballpark I consider alternate generating 1% per month (12% per annum) and Equity generating 1.1% per annun( 13.2% per annum)

The difference is Equity is locked for 10-15 years while alternate are for short term.Now 0 .1% is a lot in the long run so we should definitely have decent equity exposure.

When we are young and have no liabilities we can have say higher equity exposure and lower alternate and then gradually keep building alternate.

So if we have 20 K of expenses in a month we need to have approx 20L alternate investment to get 20K (1%) in a month to achieve Financial independence .

As our liability keep growing we also keep building alternates while equity will take of long term corpus building along with it.

Footnotes:

For alternate investment you can use these links

I2I Referral Link

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Mail me to get Cashkumar Referral

Invoice Discounting Platform TradeCred Link:

https://buy.tradecred.com/onboarding/apply-now/TC0152

For other Invoice discounting platform ping me on 9967974993 or mail me on rohanrautela9@gmail.com

Now my Alternate Investment Portfolio is composed of 3 assets:

• P2P invest ( approx Return 15-16%)
• Invoice Discounting (12-13%)
• Settlement Finance( 11-12% approx)

Each has it’s own advantage in offering better liquidity or better return. The good part is all these 3 asset classes have low correlation with broad market and provide some stability to overall portfolio in volatile times like these days!

This month I have made certain changes in the portfolio as the size has become big and some platform do not offer enough loans to provide meaningful investment opportunity.

Portfolio Composition

Portfolio Changes:

• 3 Platforms have consistent supply of new loans: I2IFunding , RupeeCircle and FinancePeer.(I intend to make these primary platforms)
• In I2I I have decent exposure thus I am investing fresh capital in RupeeCircle and FinancePeer for next couple of months.
• I am only reinvesting EMI in these 3: LendenClub, OMLP2P and Cashkumar. Primary reason is that number of borrowers are too few to invest more money
• I allocate a fixed monthly amount for my P2P portfolio in the same way people do it for mutual funds.

 Portfolio Performance

Performance Analysis:

Key Points from this month’s performance are:

• LendenClub: I am not very happy with LendenClub performance mostly in the InstaLoan category where default rate is pretty high. I Have stopped Auto Invest and now only invest in repeat borrowers and few high risk category loans.
•  I2IFunding : I have made I2IFunding as my defacto platform for government employees( Municipality, Jal Board etc) and ultra safe borrower( A, B and C).Performance has been consistent
• RupeeCircle :Strong performance continues with just one delay till now! . I am concentrating on people with decent salary, High account balance and low EMI to salary ratio
• FinancePeer : Education Loan investment has been pretty successful with zero defaults till now
• OMLP2P : very Few borrowers this month so no changes in investment
• Cashkumar: Yield has gone down due to cash lying idle in the escrow. I might reduce my portfolio exposure if situation does not change
• I am attaching Financepeer Education Loan Brochure pdf
• People who want to be put in broadcast for FinancePeer Loan may add this number : 8419975005

Calculating P2P return using XIRR vs EIV method

XIRR is the popular method and superior to NAR (Net Annualized Return) method which does not take into account cash lying in escrow account.I generally use XIRR method to calculate the returns of P2P but in some situation EIV(Equivalent Investment Value) might be more apt.

XIRR method:

This method equates the present value of cash flows and presents a better picture on the returns but a major limitation is that it leaves out future cash flows. The XIRR method accounts for all cash flows into and out of the Account. While this method is most suited for most investors I can show certain situations which can be problematic.

The difference between the 2 is that in second case we had a big cashflow (Dec’18). We have not received interest for that but it shows in the cashflow thus our overall ROI dips. This is quite common for people who have recently started investment and the new cashflow is substantial.

For people with decent old investment this might be not a problem/

Equivalent Investment Value Method

EIV works on a simple principle that an amount Y invested for X days is equivalent to Y*X amount invested for one day. For example, ₹ 10,000 invested for 10 days is equivalent to ₹ 1,00,000 invested for 1 day. Applying the principle on the account transactions of a P2P lender, the EIV is calculated as follows:

EIV = (∑YiXi)/X1

where,

Yi=Invested Amount (positive) or Withdrawn amount (negative)
Xi=Number of days since the investment to today
X1=Number of days since first investment

Return on Investment = [(Interest + Late Fees – NPAs)*100]/EIV

In this method as the last cashflow was only for 30 days hence it’s impact is less in the second case unlike in XIRR.

People can choose either method depending on which suits their portfolio more

Invoice Discounting and Settlement Finance Performance:

I keep rolling my invoice discount investments. Currently I am invested In Amazon and Flipkart

I have also invested in Settlement Finance which has daily settlement against Aadhar ATM invoice using TradeCred.

While In Invoice Discounting I invest in short duration invoices of Bluechip companies, in settlement Finance credit card or Aadhar Payment invoice which is paid T+1 day is financed for a day hence it’s an ultra short invoicing.

My current Portfolio yield and duration:

Footnote:

For alternate investment you can use these links

I2I Referral Link

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Mail me to get Cashkumar Referral

Invoice Discounting Platform TradeCred Link:

https://buy.tradecred.com/onboarding/apply-now/TC0152

For other Invoice discounting platform ping me on 9967974993 or mail me on rohanrautela9@gmail.com

What is settlement Finance and how does it fit in my asset allocation?What’s the difference between Invoice Discounting and Settlement Finance?

I have covered Invoice Discounting in my earlier post:

What is Invoice discounting?

Invoice discounting is the practice of using company’s unpaid invoices to raise working capital & fulfil its financial needs. Traditionally, financial institutions including banks and NBFCs have been discounting invoices for MSMEs. Invoice discounting involves transfer of rights on an asset (invoice) from the seller (i.e. business) to the financier (i.e. investor) at an agreed value

The process is a simple method used by companies to generate working Capital. Let’s say company A provide some services to company B.

Company A : mid sized enterprise(SME)

Company B: Blue chip company.

Now B has to pay A money for the services. A raise invoice for the payment. B being a big company takes 2-3 months for the payment.

Now A does not want to wait for the money as it needs immediate cash which can be deployed in business. Here comes invoice discounting.

1. The firm A borrows money from an investor keeping the invoice as collateral
2. The investor does not pay the full face value of the invoices; instead it pays the firm a percentage, 80-90%
3. As the investor now owns the unpaid invoices money , the money due from the end customers is credited to the investor
4. When the end customers pay the invoices, all the money goes to the investor
5. Thus investor had put in 90 bucks and got 100 end of 3 months which is the interest he earned.

The advantage over corporate FD is that this funding is backed by invoice as collateral and is thus a secured funding.

The companies which are going to pay are blue chip  thus unlikely to default.

Company A is legally liable to pay you even if company B does not honour the invoice.

All transaction take place in escrow account thus is reasonable safe.

What’s Settlement Finance?

Settlement Financing is a unique product that addresses a specific trade credit use case in India. When a consumer swipes a credit/debit/atm card, the amount is deducted from his/her account immediately. However, the merchant (receiver) has to wait 1 day for these funds to reach their account from the bank. This 1-day capital gap causes cash flow issues in businesses. Settlement financing provides 1-day loans to business that want to reduce their cash flow impact while waiting for transactions to settle from the day prior

The Platform works with registered payment intermediaries/aggregators who gives real time cash receivables to merchants/ATMs post which  the money is received by Platform in an escrow account the following day. Post settlement of lenders cash settlement amount, remaining money is passed to the payment intermediary/aggregator

What risks are involved?

In terms of actual empirical data on risks, TradeCred has facilitated over 350 crores of Settlement Financing till date with ZERO default and ZERO delays till date.

To mitigate these risks:

• TradeCred does not fund any transaction more than INR 10,000.
• TradeCred funds only maximum 90% of the total transaction volumes. Just to get a sense, overall fraud risk in the card payments system in India is less than 0.10%.

How It is regulated?

It  is a platform, and not the beneficiary of the funds nor the owner of funds. 

Type of Deals available on TradeCred?

TradeCred has both type of deals:

1. Invoice Discounting ( Min 3 Lakh)
2. Settlement Financing (Min 50 Thousand)

Flowchart of expected Return and allocation in various available alternate

To register on TradeCred use the link :

https://buy.tradecred.com/onboarding/apply-now/TC0152

For Invoice Discounting on other platforms mail me on rohanrautela9@gmail.com or ping me on 9967974993

Footnote:

Note: For alternate investment you can use these links

I2I Referral Link

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Mail me to get Cashkumar Referral

Invoice Discounting Platform TradeCred Link:

https://buy.tradecred.com/onboarding/apply-now/TC0152

For other Invoice discounting platform ping me on 9967974993

Lot of People ask the question what is the right number of mutual funds in the portfolio.How to choose a mutual fund?

There is no universal answer to it but we need to take a step back and think what we are doing when we buy a mutual fund. We are basically choosing a fund manager to buy stocks on our behalf.If we put everything in one then we are giving one manager too much control and we we invest in too many then we end up holding a new portfolio which has many overlapping stocks and portfolio weights totally different from the base funds.

The steps to choose a mutual fund start from first deciding the asset allocation. We need to decide how much we wish to put in equity , debt and alternatives before even picking a mutual fund

Step 1) Decide Asset Allocation

I have covered this many times how adding alternatives can improve our risk/ return ratio favourably. Low correlated assets is the only free lunch in finance! The various options available these days are:

Step 2) Now let’s say we have decided how much we wish to put in Equity Mutual funds. I always recommend we should have atleast 20-25% wealth in assets which can be liquidated within a year without risk .Otherwise in an adverse situation we might have to liquidate our equity at loss.

Now we set Criteria for our Equity MF. We have more than 500 Mutual funds ,how do we short list and how many?

First we decide how many Mutual funds we need. For that we need to see how big the stock universe they are covering in each category.

This chart represent the nifty top 500 stocks segregation. There are more stocks beyond these which have very small market capitalization

The Large Cap Mutual Funds cover 1st 100 Stocks i.e. Nifty 100

Mid Cap Mutual Funds cover 101st -250th stock i.e Nifty MidCap 250

Small Cap Mutual Funds cover beyond 250 to 1000+ stocks

Interestingly the first 100 stocks are most researched stocks and generating alpha is very tough. Think about it. Everything about HDFC and INFY is tracked by multiple research firms. There is not much insights you can generate. In small cap its the opposite . Not much is available to oustside world and fund manager who can hustle will get the real insights!

That’s why small cap can offer highest alpha but also highest risk as a bad economy can easily wipe out a smaller company.

Now coming to the number of funds we need. For large and midcap 1 fund for each category is enough as Fund manager can easily research these stocks.(small universe and lot of public data)

For small Cap you need atleast 2 Funds with minimum overlaps as you don’y want to concentrate the portfolio and also take away alpha.

We also need one global fund . What is so special about buying stocks in India? Just because we are born here does not mean it’s the best stock market. We will buy one international fund to diversify. It will also act as a hedge when rupee weakens as our returns will be in dollars

We have decided we will buy

1 Large Cap

1 Mid Cap

2 Small Cap

1 International Fund

Note: When market corrects a lot i.e say 10% or so ,you may add one more small cap mutual fund, as when market rise again 1) it’s easier for funds to pick up alpha 2) you want to be more diversified as you don’t know which sector will add the maximum return in a bounce back!

Step 3) Picking the Mutual Funds

I have made a broad filter to pick up mutual funds. People are free to add their own criteria and choose a different mutual Fund.

Based on these criteria I have shortlisted these Mutual Funds:

I also ensure that my portfolio has minimum overlapping and concentration across one stock. People may also opt for index fund in the large cap space. One drawback of index fund is that it has very high exposure to 2-3 names and with the corporate governance issues these days I prefer to keep lower exposure .People who are substantially diversified in other asset classes and also have comparatively lower large cap exposure may use ETF or Index fund in lieu of Large Cap Mutual Fund

Step 4) Check diversification

You can easily check diversification by selecting the weight of funds in your portfolio in a portal like value research.For mutual fund overlap you can go to fundoo.com.For rolling return rupeevest.com

For instance: if you hold

Mirae Large Cap	15%
Axis Mid Cap	10%
SBI Small Cap	10%
Axis Small Cap	10%
Franklin US opportunity	10%

Then your top exposure is:

HDFC Bank Limited	1.35%
ICICI Bank Limited	0.95%
Reliance Industries Limited	0.91%
Axis Bank Limited	0.67%
Infosys Limited	0.60%
City Union Bank Limited	0.79%
Info Edge (India) Limited	0.78%
Avenue Supermarts Limited	0.77%
NIIT Technologies Limited	0.827%
City Union Bank Limited	0.785%
Mas Financial Services Limited	0.553%

Even after a company goes bust your portfolio won’t be in deep red!

Step 5) check your liquidity status

I always ensure through my investment in

1)Invoice Discounting

2)P2P

3) arbitrage and Liquid Fund, Saving Bank account

I have enough liquidity to last 9-12 months. Equity investment portfolio should be such that you can live with a 50% fall in the market value and not lose your sleep. Think of it like a 10 year closed ended plan

Lot of people recommend 90% exposure to equity for youngsters. They should factor in that with 10% exposure to other assets the person should be able to meet all the expenses during emergency!

Conclusion: I have tried to construct a portfolio of mutual funds for passive investments which can be rebalanced in 6 months or so. It is important that we hold few but good mutual funds rather than buying whatever they hear from various sources.

Bottomline: You should do your own study and create your own filters .You can post them in the comments!

Note:

Cheapest discount broking and Mutual Fund Investment Platform Zerodha

Zerodha Referral

For alternate investment you can use these links

I2I Referral Link

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Mail me to get Cashkumar Referral

For starting invoice discounting mail me or drop a message on 9967974993 or mail me at rohanrautela9@gmail.com

This month I will cover a couple of topics apart from my overall portfolio Performance:

• How to choose invoices to invest in invoice discounting platform
• How to Manage your Liquidity efficiently

Portfolio Composition

Portfolio Changes:

• My portfolio composition has been changing recently based on availability of loans. I prefer to be able to check out loans before investing which makes it difficult to invest in platform like cashkumar were loans disappear in a blink of an eye
• I2I , RuppeeCircle and Financepeer have adequate frequency of available borrowers in the respective order
• Lendenclub has many insta loans which I am not a big fan of. I have recently started investing in Insta loans of repeat borrowers only.
• OMLP2P has good loans but off late frequency has been quite low so I have not increased my exposure

 Portfolio Performance

Performance Analysis:

Key Points from this month’s performance are:

• LendenClub: I am using InstaLoan only for repeat borrowers now. The impact of stopping auto invest in insta loans should start showing up from next month and yield should pick up from here
•  I2IFunding : Interestingly collection was able to get back some money from a delinquent loan which came as pleasant surprise.
• RupeeCircle :Only one delay till now ,that too within 30 Days, not much to complain
• FinancePeer : Still following my plan of investing in only education loans. No delinquency till now
• OMLP2P : Very few loans this month so not much change in my exposure here
• Cashkumar: Good platform but loans disappear really fast .I am keeping my exposure to a small amount as I don’t want most of the capital lying idle in escrow

Exposure Type in each platform

Over the last 12-18 Months I realised that certain platform specialise in specific loans and most of my exposure to that platform comprise those loan. If I have to choose a speciality borrower of each platform which gave me the best purchase for my buck then it would be :

Invoice Discounting Performance:

I keep rolling my invoice discount investments. Currently I am invested In PaytM.

My current Portfolio yield and duration:

How to Select an Invoice:

In Invoice discounting 2 parties are involved viz an Enterprise which is going to pay the invoice money and a vendor which has raised an invoice and to whom you will pay the money now. To be really safe we ensure both our enterprise and vendor are sound even if the deal might be for 30 days

Choosing Enterprise

• Go with a big name like Infosys, Wipro, Amazon ,Flipkart who are more trustworthy
• Check Latest Quarterly report if available
• Current Leverage and cashflow
• Any adverse news in the last 3 months.

Choosing vendor

• Financial strength of the vendor to ensure  in the scenario enterprise fail to honour receipt , the vendor is able to pay me .
• Only invest in those invoices for vendors who have decent record of raising money through the platform and avoid someone who has recently been on boarded

Preferred Tenure of Investment:

I prefer shorter dated invoices: 20 -40 days. The reason is

• Chances of adverse impact in short duration are less to an enterprise than in 2-3 months.
• You have more liquidity to meet your short commitment (Liquidity Buffer)

Managing Liquidity Like a Bank

Unlike how most individual manage liquidity poorly banks and other institution try to optimize their liquidity ,though in the recent market turmoil we have seen that even some institution do not manage liquidity efficiently and thus pay a heavy price.

How does a an average person manage his liquidity?

Let’s assume he has a 25 Lakh corpus , he thinks he need to have some fund for contingency like a job loss or sudden increase in expense!

Unlike retail People Banks take care of 2 things

a)Total sum of liquidity in a given time bracket (Asset Liability Management)

b) Quality of Assets (haircut you would need incase you have to liquidate an asset immediately

Most banks have to follow a stringent liquidity requirement called SLR(statutory liquidity Requirement) which is around 18% now which implies that 18% of banks asset should be available to meet any liquidity .SLR has to be maintained in the form of gold, cash or approved securities notified by RBI such as central and state government bonds

Look at how a bank’s liquidity looks like

Now let’s see how a Retail guys manage Liquidity

There are 2 problem with this approach of serial combination of liquidity rather than parallel(Institutional)

• Capital is scarce so you either pay rent if you want to own it or you get rent for lending. In our case we are lending through Liquid Fund, Debt and saving bank .The rent we are getting is quite low.
• When we need more liquidity we will have to liquidate Debts or Equity assets where we will have to take a hit. Lot of people assume that market will correct quickly and then they can use the capital but

“Market Can stay irrational longer than you can stay Liquid”

It means that we should not think of stocks or long term debt as a liquidity resort.

Now if we use combination of multiple asset classes parallel we can create a better and more efficient Liquidity.

Now we have overcome both our problems:

• We Don’t need to liquidate stocks for short term liquidity
• Our Assets give us higher rent with better liquidity( our average earning shoots up from 7% to 12%). We are also more efficient as Arbitrage tax lower than debt!

Footnotes:

I2I Referral Link

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Mail me to get Cashkumar Referral

For starting invoice discounting mail me or drop a message on 9967974993 or mail me at rohanrautela9@gmail.com

How would  have a portfolio of  just equity and bond funds performed vis-a-vis hybrid portfolio of (equity + Alternatives)?

First let’s see how the equities performed in the last 12 months. I will take the Index performance for large cap, mid cap and small rather than some mutual fund as it will give a better unbiased picture.

• Stock only Portfolio Performance

I have taken 100 as a base to make it easy to comprehend

It shows that if someone started with 10 Lakh in small cap fund in Jan 2018 they would have 6 lakh left after 1.5 year.

Lot of people think about stocks in terms of volatility and Return but drawdown is one really important factor to consider. How many people can digest 40% loss in value of their portfolio. Though I am sure if they hold it for a long time they will eventually make money but it’s  easier said than done.

• So we move on to our second portfolio which people generally hold : combination of debt and equity.Let’s say we hold 25% debt and 75% equity divided equally between large ,midcap and small cap .Now how will our return look like

So total portfolio return will look like:

In 1.5 year you achieved a 17% loss on capital or 1.7 lakh loss.

Points to consider

• Lot of people invest through SIP and believe that they would be able to ride volatility but unless you have recently started a SIP it wont really help you in averaging.

I had written a blog post on this topic

http://randomdimes.com/2019/is-sip-better-than-lumpsum-investment/

To put it simply Let’s say you had accumulated 100 shares at  average cost of 1 rs  over 100 months.Now your total asset value is 100

If market drops by 50% you will buy 1 share at .5 rs your average cost = (.5*1 +1*100)/(101)=.995 also your total portfolio loss is 50 Rs regardless of the SIP.

• Without going into any maths it is quite evident all the index are moving together which implies our losses and gain will move together ie. either we will make lot of money or lot of losses.

Alternate Assets Performance:

• REIT performance from the time it was launched in April 2019 ,staggering 18% return in 4 months

• My P2P portfolio performance

 

Let’s say average return on P2P is approx 15%

I will take average of my  Invoice Receivable average return is 12.5%

If I add all the alternate investment with stock portfolio then last 4 months the graph would look like:

It is clearly evident that correlation between stocks and REIT or stocks and P2P investing is very Low or -ve ( the graph are in opposite direction). If we combine the assets uniformly  we can get a portfolio which has lower drawdown and higher returns .Even with the stocks performing poorly this portfolio did not face any drawdown,.

So how to allocate weights to various assets.

There are two types of asset allocation : Strategic Asset Allocation and Tactical. 

• Strategic asset allocation

It is your base level allocation which you follow most of the time.You can either construct it mathematically

The easiest mathematical ways to do it is  Mean Variance optimisation and Black Litterman  .

People do not need to actually to follow a rigorous methodology but based on their age and risk appetite they can allocate to stocks and bond and the rest to alternate.

eg: for a 30 year old 50% stocks 20% bonds 30% alternate is decent while for a 50 year old 30% stocks 35% bonds 35% alternate can be better.

Off course the individual risk aversion is paramount to create a strategic allocation

• Tactical Asset Allocation

If someone believes market is efficient then there is no scope of tactical allocation as we expect all information is factored in the prices but we do invest in  mutual funds because we think that market are not perfect and there is scope to outperform it.

Tactical asset allocation is one way in which we can go overweight or underweight on market during certain times

Basically market returns are a a factor of Value and momentum to an extent. During phases when stocks are fundamentally undervalued we can overweight our equity portfolio while during times when market is in euphoria we can gradually start  reducing our allocation.Here I would like to add the primary aim is to reduce risk as we do not wish to get caught with a huge position in a stock bubble

The problem with conventional Bond and Equity portfolio is that there is a huge opportunity cost of not investing in equity 100% of the time as bond returns around 7.5% are too less to offset the missed chances of bull rally . ie. if you take out money out of equity and put in bond you get only 7.5% while you wait for market to correct and you miss lot of returns in the meantime.

Now our portfolio has stocks,bonds and alternates,how do we go about creating a tactical allocation

When we have alternate which provide almost same return as midcap stocks then we can always increase their allocation during an equity euphoria.

I prefer the PE and Rolling Returns  based approach as it is the simplest. These are not rules but just indicators.

Empirically it has been shown that market has given a higher average return when PE levels had been low and vice versa

For instance if Nifty PE has crossed 30 I would be wary of the market and would try to book some of the profit and transfer it to P2P, Invoice discounting ,debt etc  while if PE is below 20-22 I will gradually increase equity allocation.

The problem is sometimes market continues to rally during a growth stage and sometimes it  keeps falling. I am fine with that as my alternate are already giving a decent return and I don’t want to take the risk of a sharp equity fall during overvaluation phase

Other problem with PE based investing is that over a period Nifty PE has gone up due to changes in its composition, PE doesn’t factor in inflation etc but what we want is just to get an idea about market not some sacrosanct number.

eg : if Market goes to 9000 in next 3 months  we can increase our allocation while if it rushes to 13000 in next 3 months we can go overweight alternatives.

Conclusion: Backtesting a hybrid portfolio shows how a low correlated portfolio helps in reducing risk and can be an important tool in tactical asset allocation during a recession or a rally.

Footnotes:

I2I Referral Link

I2I Account Referral Link

(First Use the link to register then add the Code I2I50%DISCOUNT while paying to get 50% off)

Rupee Circle Referral Code- PIND145
Rupee Circle

LendenClub Referral Code – LDC11989
LendenClub

OMLP2P Referral Link

OMLP2P

FinancePeer

(Use Code MNJ6547)

Mail me to get Cashkumar Referral

For starting invoice discounting mail me or drop a message on 9967974993 or mail me at rohanrautela9@gmail.com