Money vs risk, in normal times
AssumptionLarge-cap shares (India)30% of money · 61% of risk
Mid/small-cap shares10% of money · 26% of risk
Government bonds20% of money · 1% of risk
Corporate bonds15% of money · 2% of risk
Gold (in rupees)10% of money · 3% of risk
Cash / liquid funds / FD10% of money · 0% of risk
US shares fund (USD)5% of money · 7% of risk
Ivory bar: share of money. Emerald bar: share of risk.
Money vs risk, in a crisis
AssumptionCrisis ups-and-downs are higher and risky assets move together more. Method: fixed rule (measured from data arrives in Phase 4).
Large-cap shares (India)30% of money · 61% of risk
Mid/small-cap shares10% of money · 27% of risk
Government bonds20% of money · 1% of risk
Corporate bonds15% of money · 1% of risk
Gold (in rupees)10% of money · 2% of risk
Cash / liquid funds / FD10% of money · 0% of risk
US shares fund (USD)5% of money · 9% of risk
Ivory bar: share of money. Emerald bar: share of risk.
How many independent bets?
Effective holdings by weight: 5.4
Effective holdings by risk (normal): 2.3
Effective holdings by risk (crisis): 2.2
Diversification ratio (normal): 1.40
If the crisis number is far below the count of your holdings, the portfolio is less spread out than it looks.
How holdings move together
AssumptionNormal times
LCMCGSCBGDCAUSLKLC1.00.9-0.10.10.00.00.60.2MC0.91.0-0.10.10.00.00.50.2GS-0.1-0.11.00.60.10.10.00.1CB0.10.10.61.00.10.10.10.1GD0.00.00.10.11.00.00.10.0CA0.00.00.10.10.01.00.00.0US0.60.50.00.10.10.01.00.2LK0.20.20.10.10.00.00.21.0
Emerald: move together. Red: move apart. −1 to +1.
In a crisis (fixed rule)
LCMCGSCBGDCAUSLKLC1.00.9-0.10.10.00.00.80.2MC0.91.0-0.10.10.00.00.70.2GS-0.1-0.11.00.60.10.10.00.1CB0.10.10.61.00.10.10.10.1GD0.00.00.10.11.00.00.10.0CA0.00.00.10.10.01.00.00.0US0.80.70.00.10.10.01.00.2LK0.20.20.10.10.00.00.21.0
Emerald: move together. Red: move apart. −1 to +1.