(This article was first published on Making Smalltalk.)
It’s quite typical for most people to make investing the last thing on their priority list after salary day. A large number of us don’t really end up investing regularly.
Jobs give us a salary, but as the month progresses, the money in the account dwindles. But on the other hand – invested money grows, compounding with time. It generates wealth. And, after all, isn’t that why we put in the hours for a salary every month?
The All Weather Investing smallcase is built as a recession-proof investment product. Whether you’re looking to park money, or make a long term investment, it is stable & low-risk. Over the last decade, it has not only beaten inflation, but also outperformed the Nifty-50.
To begin with—here’s a gist of what the All Weather Investing smallcase is.
The All Weather Investing smallcase is a portfolio of 4 exchange traded funds (ETF) that are diversified across three asset classes—equities (stock market returns), fixed Income (bank fixed deposit type returns) and gold.
The money going into each asset class is determined by the prevailing market conditions.
Fixed income consistently gives you positive returns and equities help you generate huge returns in a bull market. Gold provides the much needed protection against the decrease in value of equities in a down market.
The following are the six major reasons to invest in the All Weather Investing smallcase.
When you’re investing to build wealth over the long-term, consistency of returns matters more than sporadic periods of exponential returns. Every equity-related investment does well in a bull run, but it is how your investment does in a bear phase is what matters more. The All Weather Investing smallcase is designed to deliver consistent returns over long periods of time. There won’t be a period of mind- boggling returns, but there also won’t be periods of drastic losses. The returns will average out to be market-beating and inflation-beating for all long-term periods.
Volatility in the equity markets hurts not only returns, but also an investor’s mindset. Investors tend to shy away from investing when the markets are frequently going up and down. This makes them miss investment opportunities and profits over the long-term. Because the All Weather Investing smallcase is not volatile by design, it will allow you to continue investing even when the stock markets look scary.
Less risk of losses
The All Weather Investing smallcase takes exposure to equities, bonds and gold through ETFs. The portfolio mix is determined by how volatile the stock markets are. In less volatile periods, exposure to equities is increased to earn higher returns. And in volatile times, exposure to gold and bonds is increased to protect the returns from getting eroded. This strategy drastically reduces the likelihood of facing losses by investing in this smallcase.
All Weather Investing is a passive investment strategy. The portfolio is rebalanced only quarterly. This prohibits active churn, which reduces the cost of investing. At the same time, it gives the investment instruments adequate time to bear fruit. Passive investing is followed by successful investors like Warren Buffett who believe that investments are supposed to be held for long periods to make the maximum gains from them.
No lock-in period
Unlike traditional investments like FDs, the All Weather Investing smallcase doesn’t come with a lock-in period. The smallcase also allows you the flexibility to invest systematically and pause or stop investing whenever you want. While the strategy is best for long-term investing, there is no stopping you from redeeming your investments any time you want.
Invest and forget
Not a lot of investors have the time or energy to actively look after their investment portfolios. And active management is also not required when you are investing for the long-term. How your investments are doing this month doesn’t matter when you are investing for 5 years and more. This is where the All Weather Investing smallcase fits perfectly. You can begin investing in it and forget about it for the next few years. Since it’s a low-risk strategy that works in all market conditions, you don’t have to keep checking for unruly surprises.
These are the prime benefits of investing in the All Weather Investing smallcase. Invest, sit back and watch your money grow.
Nice article; I like your flair.
I am an NRI and a fellow-Amdavadi 🙂
I actually have a couple of questions; hope you will oblige.
1. Can U.S.-based NRIs participate in smallcases?
2. 2. Are there any smallcases that ALWAYS directly invest in stocks (NEVER in ETFs)? If so, can you provide a couple of examples?
[For U.S. investors, investing in Indian ETFs and MFs (through non-U.S. markets/entities) are considered as investing in PFICs (passive foreign investment company). Taxwise, PFICs are extremely punitive for U.S. investors. That is not the case if directly investing in stocks. As a result, U.S. investors are strongly recommended to invest directly in Indian/foreign stocks as opposed to foreign/Indian ETFs or MFs].
Thanks for reading.
Investing in smallcases is essentially buying stocks, so you should be able to invest through a brokerage that caters to NRI investors.
There are many smallcases that invest only in stocks. You’ll find them here: https://www.smallcase.com/discover/explore