I first refresh my memory on what I set to do with this investment. i.e. the goal of this investment. I go by the dictum “a journey without a destination is an adventure” and want to avoid expensive adventures.
Let us say that this goal was to buy a car in 3 years from now. I wanted to invest ₹1L (₹100K) with view that it will become ₹1.4L (₹142K). Let us also assume that I invested on 1 Jan 2019, today is 30 Dec 2019 (ease of calculations).
I now have 2 more years to go and I need to determine the following:
Table below shows the return I should make each year to reach my target
| 01-Jan-19 | 30-Dec-19 | 30-Dec-20 | 30-Dec-21 |
| 100,000 | 112,000 | 125,440 | 140,493 |
| 01-Jan-19 | 30-Dec-19 | 30-Dec-20 | 30-Dec-21 | |
| Target values | 100,000 | 112,000 | 125,440 | 140,493 |
| actual | 100,000 | 111,500 |
I note that I made 11.5% compared to my target of 12% for the year 1. I am also note that I should make 13% in next year to compensate for the minor shortfall and keep the portfolio on track.
Now I compute the exposure to each underlying equity stock. This step is a necessity to fully understand my collective exposure to the actual stock.
I now look at what the mutual funds I have invested are holding. Lets us say for ease of simplicity the following table shows their holdings
| Fund | Invested in | % of NAV | My exposure on based on market value |
| Sundaram Corporate Bond Fund | Reliance Industries | 25% | 2,713 |
| Sundaram Corporate Bond Fund | Adani Power | 25% | 2,713 |
| Sundaram Corporate Bond Fund | L&T infra | 25% | 2,713 |
| Sundaram Corporate Bond Fund | ICICI Bank | 25% | 2,713 |
| Canara Robeco Equity Taxsaver Fund | Reliance industries | 25% | 5,500 |
| Canara Robeco Equity Taxsaver Fund | Marico Industries | 25% | 5,500 |
| Canara Robeco Equity Taxsaver Fund | State Bank of India | 25% | 5,500 |
| Canara Robeco Equity Taxsaver Fund | TVS Motor Company | 25% | 5,500 |
I now collate my entire holdings across my equity holdings, mutual fund’s underlying and FDs.
| Issuer | Exposure based on Market value | Exposure % |
| State Bank of India | 38,050.00 | 34.1% |
| ICICI Bank | 36,812.50 | 33.0% |
| Infosys | 12,000.00 | 10.8% |
| Reliance Industries | 8,212.50 | 7.4% |
| TVS Motor Company | 5,500.00 | 4.9% |
| Marico Industries | 5,500.00 | 4.9% |
| L&T infra | 2,712.50 | 2.4% |
| Adani Power | 2,712.50 | 2.4% |
Looking at the exposure holistically I see that I have about 77% of my investments between 3 stocks i.e. State Bank of India, ICICI Bank and Infosys. I use the term stocks here to represent the fact that I hold equity and /or debt instruments from these institutions. Technically these would be called “issuer”.
This higher exposure might not necessarily be a bad thing, but I need to be mindful of where my money is invested by me and by the mutual funds, I have invested in.
Now I set out objectively to see if I will invest in these securities if I were to invest today or would I choose other asset classes or other assets.
This view is required to determine what is the best course from here.
I will deep dive into each stock, each issuer and read reports, market views on them. My objective now is to have a view on the earning potential of each asset in my portfolio.
Once I have this view, I tabulate it as below to have a best- and worst-case scenarios
| Asset class | Asset | Invested amount | Asset allocation of Investment | Current market value | Current asset allocation | Forecast return (highest) | Forecast return (lowest) |
| Equity stocks | Infosys | ₹ 10,000 | 10% | ₹ 12,000 | 11% | 10.0% | 8.0% |
| Equity stocks | State Bank of India | ₹ 10,000 | 10% | ₹ 10,500 | 9% | 8.0% | 6.0% |
| Equity stocks | ICICI Bank | ₹ 10,000 | 10% | ₹ 12,500 | 11% | 12.0% | 10.0% |
| Mutual funds | Sundaram Corporate Bond Fund | ₹ 10,000 | 10% | ₹ 10,850 | 10% | 7.0% | 5.5% |
| Mutual funds | Canara Robeco Equity Taxsaver Fund | ₹ 20,000 | 20% | ₹ 22,000 | 20% | 11.0% | 9.0% |
| Fixed deposits | ICICI Bank | ₹ 20,000 | 20% | ₹ 21,600 | 19% | 8.0% | 8.0% |
| Fixed deposits | State Bank of India | ₹ 20,000 | 20% | ₹ 22,050 | 20% | 8.0% | 8.0% |
I now have all the information required to decide on the next steps. In the next post we will discuss more on what my course of action would be.
Meanwhile, I welcome your comments. Stay safe and Happy Investing!
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