We have updated our recommended portfolios for 2019 in line with our practice of revamping them when we change our Recommended Funds list. We remain neutral on India and hence our asset allocation remains the same for the next year as well.

A careful observation of our portfolios shows that our equity allocation has not really changed except in the case of mid cap, infrastructure and global categories. This is because our recommended funds of 2017 in these categories did not make it to the list this year – either because they did not clear the filters of our model, or because of the change in their classification as per the new SEBI mandate. However, there is a significant change in the debt allocation as all the 2017 funds included in the portfolios did not clear the filters in our model.

We had been including an ultra short duration fund in our portfolios as a liquidity cushion and also with the view that Investors can use this surplus to enter the equity markets whenever there is a correction. This year, we have decided to substitute the ultra short duration fund with a liquid fund as we thought that this category would be more suitable to meet the above requirements.

In terms of investor action, we would like to reiterate what we had written in the note on the Performance of our Recommended Portfolios from Nov 16-Oct 18:

"Investors should not get nervous and start pressing the panic button. As we wrote in our Research Note on iFAST Recommended Mutual Funds 2018-19, "An exit (of a fund) from the list does not imply an exit from investor portfolios as well. This table should give confidence to our investors that our model may leave out funds if they don't clear the filters; however, a few years later the same funds can be back in the list. In cases where we do revise our opinion of a fund and are no longer comfortable holding onto them in any investor portfolio, we will definitely update the investors. But if there is no communication from our side, investors can continue with their existing SIPs and lumpsum investments into the funds."

We maintain that all the funds that the model did not clear should still be held on to, as we believe that they are going through a short phase of volatility and their exit from the current list of Recommended Funds may not be final.

Table 1: Portfolio Fund Allocation Changes