Approach and Strategy

Our industry focused strategies DIVERSIFY relative asset classes to balance risk and reward as each asset class behaves differently in different market cycles.

Equities

Equities have the potential of beating inflation over long run. Over the past decade until 2024, the average inflation in India has hovered around 5.15%. The 20 year return during June 2004 to May 2024 stood at 12.42%, which is a return of 7% on an inflation adjusted basis. (Source: AMFI)

Equities are ideal for achieving long-term goals. The weightage of equity in your portfolio would depend on your risk appetite and time horizon.

Debt

Fixed income is essential for diversification as well as for providing downside protection to your portfolio. The proportion of allocation towards this asset class would differ as per your risk appetite, Time horizon and goals. While fixed income securities are generally less volatile than equities, Bonds have a negative correlation with interest rates – as interest rates rise bond prices fall.

Commodities

Commodities tend to have low to negative correlation to traditional asset classes such as equities and bonds. Hence, including commodities in your portfolio provides the benefit of diversification as they react differently due to changes in the economy as compared to stocks.

They benefit in an inflationary scenario, providing a hedge against inflation.

Commercial Real Estate


Over the years, many innovative ways to invest in real estate have emerged. Investors today have the option to invest in listed real estate investment trusts (REITs) and real estate fund of funds (FoF) which allow retail investors to invest small sums into this asset class.

REITs and real estate “FoF” allow investors to get exposure to a wide range of real estate assets like commercial shopping malls, hotels, data centers, listed real estate stocks and more, not only in U.S. territory, but across the globe.

The main advantage of using REIT, or “FoF” route is that investors can diversify beyond mainstream asset classes(MAC) such as equity and bonds, and have the benefit of liquidity without direct ownership.

Alternatives

The most UNLIMITED diversification class, meant for sophisticated investors who possess a deep understanding of untapped markets.

Typically, Alternatives reflect a higher minimum investment ticket size, due to limited roles in unique opportunities presented for portfolio expansion.

Which is the right asset class for your portfolio?

There is no straightforward answer to this question as each asset class has a unique purpose and characteristic. For instance, equities have growth potential while fixed income and cash provide downside protection.

If majority of your goals are long term in nature, you should ideally hold a larger proportion in equities. If capital preservation is your goal, then your portfolio should have a predominantly income tilt toward one asset class.

Conclusion


Adding different asset classes in a portfolio mitigates risk in your portfolio as each asset class may react differently under different market cycles.

In technical parlance, you should aim to add asset classes that have low “negative” correlations with each other.

@ Billionaire Enterprises, we know to avoid reshuffling your portfolio at frequent intervals, mitigating friction per your goals and time horizon to protect the downside risk as you optimize opportunity to align your holdings for better input-outcome.