A ‘fun portfolio’ is essential for investment enthusiasts

People who like and get excited about investment products should maintain a fun portfolio.

After the initial few years of exploration, most investors will settle down with a portfolio of assets. From then on, the assets tend to be stable since they have chosen these assets after some exploration and experimentation. For my own portfolio, they are 2 equity index funds and a debt fund. I don’t think I want to change those assets now since these assets were chosen after a lot of deliberation.

However, there are fancy investment assets that I want to invest in. Not because they’ll generate great returns, but because I just like them and I want to own a piece of them.

Image credit: pickpik.com

Here are a few that I have wanted to invest in over time:

• Holding equity shares directly rather than through mutual funds.
• Offerings like Kotak Cherry and ETMoney Genius.
• Edelweiss AMC’s thematic fund that invests only in IPOs.
• Momentum strategies, especially those involving mid- and small-caps.
• Multi-asset strategies.
• … and so on

I take pocket money every month, and that money is invested in these fancy assets/strategies. Having a ‘pocket money’ system allows me to cap the size of this ‘fun portfolio.’ This allows me to have fun playing around with fancy assets without jeopardising the family’s financials.

Money is fungible, but many of us don’t appreciate that

Quoting a Bits about Money article on credit card rewards:

Money is fungible, money is fungible, money is fungible, but many people don’t actually orient their lives as if this were true, and so the financial industry meets them where they are and then charges them for the privilege.

This is so very true. I learnt this through experience, after paying interest to a bank for no good reason.

I had some unexpected expenses a few years back. I had assets I could sell, but I didn’t want to sell them. I was too emotionally attached to be able to sell them. I decided I’d pledge some of my debt mutual funds and get a loan. My bank happily took the debt fund units as collateral and issued me a loan. I was paying over 8% interest on the loan while the collateral, the debt fund units, were appreciating roughly by 5%. It took me many months to realise that I was paying my bank for the “privilege” of holding on to a low yielding asset.

‘Money going down the drain’ by Rainbow International CC BY 2.0

It was easy once I realised my foolishness. I sold off the debt funds and closed the loan.

It makes no sense to pay a bank only to hold onto some assets. It is even less sensible if the asset in question appreciates more slowly than the cost of the loan.