Building a portfolio for lazy investors

Nature’s depiction of a Lazy Investor

Not everyone has time or energy to invest in stock markets. Some have the money to invest. But everyone wants to make money in stock markets 😉 It is like saying that one wants to go to heaven but doesn’t want to die. We have already shared our thoughts on how doing nothing can work in stock markets. This post continues on building on magic of laziness.

1. Start investing regularly and equally in 2-3 Index Funds. We recommend you read about importance of Index Funds to fully understand their benefits. After that, you can look at a list of Index Funds in India to choose the funds you want to invest in.
2. India is a growing economy and is expected to maintain high growth rates for atleast a decade or two. So it’s not advisable to stay away from actively managed mutual funds. Alongwith index funds, one should also invest in about 3 Equity Funds – Large Cap, Mid Cap & Multi Cap Funds. This would provide adequate exposure to growth stories at various market capitalization levels.
3. We assume here that one would also be interested in picking direct stocks. For boring and lazy investors, we suggest they stick with stocks of good companies. But good companies are not good investments at all prices. Hence one should wait to buy direct equities when markets are undervalued. Overall market undervaluation can be judged by checking ratios like P/E, P/B Ratios and Dividend Yields of the market. Our take is that markets trading at anything below P/E of 15-16 can be considered to be a good time to enter individual stocks (assuming that stocks themselves are not overvalued compare to their industry peers or due to some news or irrational exuberance). Having addressed the issue of when to buy, we now face the question of what to buy. A good starting point can be stocks making the index (like Nifty 50 or Sensex). These are large cap stocks that can be considered to be good long term picks. Another good but boring idea can be to look at stocks that pay good dividends and have good dividend payout history. These stocks offer constant stream of increasing cash as dividend payouts. And then, you can live off dividend income forever. 🙂
4. Till now we have only looked at direct and indirect equities. It would be wise to have debt (funds) to bring in stability to the portfolio. Though Stable Investor has not done any research in domain of debt funds, a good starting point can be list of good long term debt funds available at moneycontrol.com
5. Last but not the least, it is advisable to put some money in Bank fixed deposits too. You never know when you might get an opportunity to invest substantially in markets (Think: Crashes). During such times, FDs can be liquidated to enter markets and get stocks at bargain prices.