My Year End Investment Analysis And Review – 2022

Portfolio and asset allocation review for 2022

So, another year gone by in the equity markets. In many ways this has been a brutal year for equity investors.

The Indian stock market saw a lot of volatility. The Nifty started the year at 17K. It went down to 15.3K in June and back up all the way to 18.7K in Dec. If you held your SIPs in the index through the year you would have done well.

The story is of course not the same for the US indices. One of my investment strategies includes investing in the S&P 500 and the Nasdaq 100. Both of these have had a pretty bad year.

The Nasdaq 100 started the year at 15.7K, which was already almost 1000 points down from its peak in Dec ’21. It has closed the year at 11K, losing approximately a third of its value in ‘22. The S&P500 has come down from 4.6K to 3.8K.

In parallel to these movements, the Indian Rupee has lost value against the US Dollar. It fell from 74 to 82 per $. For those of us invested in $ stocks, this is a mitigating factor, it has helped reduce the impact of the US index drops.

So, let me share how this has impacted my investments. Since my investments are still largely in Indian indices, the year has been OK.

Investment Strategy Recap

To recap, this is my current equity investment thinking and it is not much changed from last year.

How did I fare on these through 2022

Indian Index: As pointed out above, those who stuck to the index would have exited the year on a positive note. An approx. 10% return in 2022 would count as a good outcome.

Large caps: My large cap stocks moved positively through the year. They are also part of the nifty index, so no big surprises there.

Small caps: My exposure to small caps is not huge. They don’t swing my overall portfolio too much. But, it has been a mixed bag even within that. I had 2 small caps which went to all-time highs and then dropped about 25% of that value. 2 others have been flat through the year. I would count myself lucky that I have not lost value in this part of the portfolio.

US Indices: These indices have hurt of course. My investments in both S&P500 and Nasdaq100 are down. I was not able to add to these in the latter half of ’22. Indian funds investing in these indices had reached their cap and were not allowed additional investments by the RBI. In retrospect that might have been a lucky break.

Momentum: As I noted in a similar post at the beginning of 2022, I outsourced the Momentum investment to a PMS. Given how the year fared, momentum has been a mixed bag. For the year I would say my momentum portfolio is flat and that is a lucky break. I have not burnt any of the capital.

The most important thing for me as an investor in 2022 has been my time involvement. I have significantly reduced the time spent looking at the market or investing. I am able to get closer to my ideal of passive investing.

What about IPOs?

2022 had a fair share of IPO excitement with the LIC IPO. An IPO which was expected to have significant listings gains opened at a discount. It ended 2022 at ~685. Of course Paytm was the story that we all followed.

I had my bad brush with IPOs in ’22. Contrary to my own advice of steering clear, I invested in an IPO fund. I was convinced that they would get QII allocation and therefore realise listing gains.

With the market and IPO downturn, no surprise that the fund tanked as well. I had to cut losses at -10% and lick my wounds. A moderately expensive lesson to follow my own advice.

I will henceforth steer clear of IPOs. It means I will miss the occasional listings gains but that is a small cost to pay.

What about the overall allocation strategy?

In ’22 I added 2 line-items to my allocation buckets. VC and Crypto.

While I had capped crypto at 2%, I am glad I never got anywhere close to that and stopped investing in crypto early in ’22. My losses there are negligible.

In ’22 I also had my first foray in the venture investing space. As of now I am keeping this to within 5% of my portfolio. I will review this periodically and decide how to look at this allocation. I invested in a fund raise by an Indian early stage VC firm.

Real estate still forms a large portion, it will take a few years to correct. Of course, because of the drop in equity in ’22 the RE side looks heavier than it was last year. This is without adding anything to real estate through the year.

Similarly, I find that I am lighter on debt than my ideal allocation demands. That is an area I am shoring up now.

Though I am still debating whether it is the right strategy to build up the debt portion of my portfolio while I still have a steady income. I can afford some volatility in returns.

For now, at 13%, I think my portfolio has enough debt. It should be able to provide me a war chest in case of a massive drop in the markets.

Gold, which is an asset many of us Indians tend to favor, is still within the 5% limit I have set for it. Of course this is paper gold in the form of Gold ETFs.

Plans for 2023

Continue investing in the index, same allocation proportion – 1/3rd each in Nifty 50, Next 50 and US Indices.

Be alert to buying opportunities in the large caps I am invested in

Keep my eyes open for multi-bagger opportunities – I do this by subscribing to different magazines, blogs, groups, services. I am trying to remain mostly passive while doing this.

Continue the Momentum strategy through the PMS

Keep an eye on the debt portfolio, as bond rates change see if I want to invest in Gilt over short-term debt

Summary:

2022 was a bad year globally for Equities.

The Indian market was blessed to have given positive returns

I was tempted by all the IPO noise in 2021 and succumbed to it, burning some capital along the way. An expensive lesson learnt.

Overall allocation remains approximately in the ballpark of where it was in ‘21.

2023 will be a year of continuing the index investing and other strategies.

This might be a good opportunity to review the very basics

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.