Wednesday, October 22, 2008

Capital preservation mode

Most of my friends know that I have been in a capital preservation mode for quite some time now. There is nothing that I would like better than to able to preserve the purchasing power of my capital for the next couple of years. (i.e a 0% real return would be considered a crowning achievement )

I do not have an answer to the questions that I had way back in December 2007. But the scenario that I had expected seems to be unfolding. The Fed is fighting to inflate and at some point it should succeed ( i.e arrest fall in nominal prices). Whether the US goes the Wiemar way or manages a 1970s rerun is still a matter of great debate.

Given this scenario & its impact on India, my inclination has been to hedge with investments in diversified asset classes with the hope that the losses in one can be offset by gains in another. Just to give you a feel of how confused I am, here is a break up of my portfolio over the past year. (And yeah I took my advice given on this blog in Dec 2007 and only have money that I can afford to lose on the stock market.)

Oct 2007
85% Stocks
5% ETF Gold
10% Cash

Dec 2007
75% Stocks
18% Liquid Funds
5% ETF Gold
2% Cash

March 2008
35% Stocks
40% Liquid funds
5% ETF gold
20% Cash

Oct 2008
20% Stocks
7% Short term Gilts
33% FD in public sector banks
5% FMP
15% Gold ( both physical & ETF)
17% Cash in public sector banks
3% Cash in other banks