Dear Investors,
As part of our wealth creation journey, we investors preach compounding and investing in the right stories, yet an equally important aspect to wealth generation is wealth protection. The HQRP portfolio has followed a bottom top analysis through which we identified and continue to identify significantly undervalued stocks that has a high margin of safety.
However, our prompt decision to allocate 20% to the NASDAQ ETF is our response to the changing macro environment. For the current rebalance we will be building towards our 20% allocation in two parts, starting with a 10% allocation as initial position.
Rebalance update was pushed by a weeks-time in order for us to further study the macro environment and take note of the latest CPI data. The inflation rate in the US is now near a 40 year high, and with this we expect the easy money environment to tighten.
Since the wake of the pandemic, markets were driven to all time highs by dovish monetary policy and expansionary fiscal policy, surely this bought about economic progression but along came the inevitable inflation figures.
This prompt timely allocation to the NASDAQ ETF will be a mechanism to:
- Reduce impact of rising interest rate expectation and the ongoing tapering
- Protect against the INR depreciation or USD appreciation
- Reduce overall volatility of the HQRP portfolio as we near a credit cycle peak
- Benefit from the value creation opportunity in the international markets
The NASDAQ 100 ETF to which we will be making the allocation is the Motilal Oswal Nasdaq 100 ETF (MON100).
As we progress through time, we intent to reduce the weightage of the NASDAQ ETF and allocate capital to Mid and Smallcaps and realign with our Smallcase strategy. Our top priority at this point of time is to reduce overall volatility in the portfolio and gear for a tightening interest rate environment, INR depreciation, and weakness in the broader Indian equity and credit market.
As we always echo, every single security held across all our Smallcase portfolios are fundamentally sound securities which are trading at very comfortable valuations and are potential wealth creators for all type of long-term investors. However, the short-term market action or market sentiments do not differentiate between a good stock or a bad stock, if the sentiment is negative, all stocks across markets and regions fall in tandem.
We hold in high regard the trust placed upon us by our 7,000+ investor community members. We are highly critical of this fact and we are committed to grow and protect your wealth throughout the journey and irrespective of what the market condition is in the short term.