KYP: Know Your Portfolio

Investor these days don’t invest in single type of investment vehicle, they have a plethora of financial instruments available to invest their money. In the past, people used to invest mainly in stocks or bonds, which were part of the broader asset classes known as equity and debt. However, these days these asset classes have been further divided into sub-asset classes. Securities and Exchange Board of India (SEBI) in its re-categorisation circular for mutual funds has clearly segregated these asset classes. However, when it comes to investment many people just ignore the portfolio and most probably concentrate on the individual investments that they have made. That said, it becomes important for investors to have a KYP (Know Your Portfolio) by which investors should concentrate more on portfolio and its asset allocation and re-balancing and not on individual assets.

What includes in KYP?
Your KYP should have certain things which would help you understand your investments better.

1. You need to first assess your risk profile and understand the level of risk you are ready and able to take at different tenures.

2. Next, you need to define the tenure for which you wish to invest.

3. To get more clarity and meaning you can also link your financial goals to a portfolio.

4. Further, you need to understand the suitability of the broader as well as sub-asset classes based on your risk profile and investment tenure. Say, for instance, you are a moderate risk taker and your investment tenure is 15 years from today. So, here on a broader asset class level, you may be better off with having a portfolio of 60 per cent in equity and 40 per cent in debt. However, on a sub-asset class level, you may be better off investing 30 per cent in large-cap, 20 per cent in multi-cap, 10 per cent in mid-cap, 20 per cent in Gilt and 10 per cent in short duration debt.

5. Further, you need to revisit your portfolio annually to check how it is fairing and whether they are in the same proportions as decided while making a portfolio or different. If different then you need to bring it back to the decided proportion by re-balancing your portfolio. You also need to check whether with the investment tenure left, do you need to change the asset allocation to become more conservative.

KYP would indeed help you to streamline your investments and manage it without worrying about the external factors affecting your portfolio. You may also have multiple portfolios and can divide them into short-term, medium-term and long-term or you may also have different portfolios for a particular financial goal.