STEP 1
I start with the goal and the clock
First, I write one plain sentence: “Rs 25 lakh for my daughter’s college in eight years.” Then I write a number: 8 years. That’s it. The moment I see
Note to self: If you can’t say the goal in one sentence, you can’t buy a fund for it.
STEP 2
I fix the asset mix before touching any fund
This is the most boring—and most important—bit. Horizon and risk capacity determine the allocation between equity and debt. Then I rebalance once a year (or when any sleeve drifts by +/-5%). Rebalancing with fresh flows keeps taxes quiet.
STEP 3
I build the core first, and keep satellites small
My core equity is either a broad index (Nifty 50/100/Total Market) or a rules-driven flexi-cap, with low downside capture. My core debt is short-duration or roll-down quality—no yield theatre.
My satellites—mid, small, and a factor here or a theme there—live under a firm ceiling. Curiosity is welcome; dominance isn’t.
Note to self: Let the core make you rich; let the satellite make you curious.
STEP 4
I choose Index vs Active by category, not ideology
Large-cap? After accounting for costs, the index often prevails. I look for tracking difference (TD) near zero and tracking error (TE) that isn’t noisy.
Mid/small-cap? A disciplined active fund can earn its fee if it respects capacity and sticks to its style.
STEP 5
I interrogate costs, consistency, and capacity
Costs compound. Here’s the arithmetic I can’t unsee: a Rs 10,00,000 lump sum at 12% before fees ends at Rs 67.28 lakh (2.0% TER), Rs 80.62 lakh (1.0%), Rs 88.21 lakh (0.5%), Rs 94.75 lakh (0.1%) in 20 years. That Rs 20 lakh + gap between 2.0% and 0.5% is bigger than most “alpha” people chase.
Consistency beats a hot streak. I want funds that sit in the top half for majority of rolling windows and defend better when it’s ugly (downside capture
Capacity matters. When a small-cap fund grows rapidly—for example, from Rs 3,000 crore to Rs 35,000 crore in four years—it inevitably dilutes its top-stock concentration and moves up the market-cap ladder. As a result, the fund can no longer take the same high-risk, high-reward positions it once could, making future outperformance more difficult.
STEP 6
I open the hood for a two-minute audit
Equity: I look for a percentage in top holdings (I prefer ≤12–15%), % in top 10 (core funds ≤45%), style discipline (no sudden lurches), and sector balance.
Debt: I read the credit map (AAA/SDL/Gilt), check duration matches the label, and skim for long-tail paper that won’t trade when I need it to.
STEP 7
I size positions with hard limits
Single fund: 10–15% of equity sleeve; 15–20% of debt core.
Satellites (all put together): ≤10% of the total portfolio.
Example: If my equity sleeve is Rs 20 lakh, two mid-cap funds at 6% each are plenty; three “fun” thematics at 1–2% each scratch the itch without hijacking the plan.
STEP 8
I write my exit rules when I’m calm
I rebalance annually or on +/-5% bands, using fresh flows if possible. And I keep three numeric exit triggers:
Mandate drift: >20% style breach for two straight quarters.
Rolling performance: bottom quartile on 3-yr rolling in ≥60% of windows.
Team: Portfolio manager exits without a named, experienced co-portfolio manager watchlist; if consistency also decays, I move.
REBALANCING IS THE KEY
A two-year path: Year-1 equity −30%, debt +6%; Year-2 equity +20%, debt +6%; Year-3 equity +15%, debt +6%.
No rebalance ends near Rs 10.78L; rebalance back to 50/50 ends near Rs 10.98L. A quiet ~+1.9% lift for doing the unfashionable thing.
THE 30-SECOND RED-FLAG SCAN I RUN BEFORE I CLICK “INVEST”
Fancy YTM with murky credit disclosure, chronic high turnover without a stated edge, AUM spikes in small/micro, themes sneaking into the core, and index funds with TE that’s an outlier.
Note to self: Pick the process once, let the process pick your funds.
That’s the whole method. Not hot, just repeatable. Automate the SIPs, fix one day a year for maintenance, and let arithmetic do its job while you get on with your life