Number two is to have an emergency fund. So, if you’ve had some money put aside for emergencies if it’s like three months’ worth of your expenses, our recommendation is to have an emergency fund of at least six months to a year of your monthly expenses. You can do that in a high quality ultra-short-term fund or short end products of mutual funds or just leave it in the bank. That should also be okay. Depending on how conservative you want to be six months to one year of your monthly expenses, is your second goal.
Your third goal is to look at your existing portfolio and look at what I mentioned earlier, which is, are your funds really having too much of overlap between each other. If they are, make sure that you’re spread out on your asset allocation, not just within equity and fixed income but try and include other asset classes as well.
Personally, in my conversations with my advisor what I have done in the last couple of months, is to buy gold bonds. So, I’ve increased my allocation a little bit to that asset class as well. We’re now considering putting some more money into real estate investment trusts, so that we can get an exposure to the real estate investment class. I am also invested in international funds and I’m increasing a little bit of allocation to international funds because my daughter is set to go study abroad and it’s good to have something where your rupee investments are pegged to the dollar. So, it moves in tandem and you don’t get some bad surprises. So, having international funds give you equity exposure and it also gives you currency exposure. So that’s what I’ve been doing with my advisor and that’s what I recommend to people.
Ultra-high net worth investors and high net worth investors also have a seventh option, which is called alternates—which could be things like private equity, investing in paintings and sculptures and things like that, a legitimate asset class but for the retail investor, I think if you are spread around at least four or five asset classes, that is your objective. In all of this, I have been very well supported by my advisor. So, I would say that having a good advisor is probably fundamental to getting all of this right.