I complete 7 years in the markets this month and I have built my ‘equity portfolio’ in the proportion: 65% Mutual Funds (Mid Caps, which recategorised into large & mid caps) and 35% Direct Equity.
Even though I am highly satisfied with my XIRR and there is absolutely nothing wrong in my equity portfolio, the ONLY factor which is pushing me to shift my entire portfolio into the passive space, is Management Risk.
The alarming rate at which irregularities and opaqueness at the management level are coming to light is concerning, and that too of large cap companies. First it was Hero Motorcorp, then Delta Corp, now Dabur and let’s not even talk about Adani. During these times, where so many balance sheets seem suspicious, passive is the only way forward in my opinion. Very simply, I believe the collective wisdom of every investor and the collective wisdom of the behaviour of the entire country should determine the future outcome of my portfolio, instead of it being at the behest of the management of a bunch of companies. With time, management risk of stocks are increasing rapidly. I really don’t know which company’s balance sheet I should trust even though I scrutinise every last detail. But I can do only so much sitting behind a laptop and maybe active fund managers might dig a lot more.
@nithin and Zerodha Fund house has a mammoth role to play in pushing new and experienced investors into the passive space. Broader market exposure seems to be the only space where investors with moderate risk appetite can build a healthy portfolio and also sleep more peacefully at the same time.