Nano Allocations: Why this portfolio allocation mistake will waste your time and energy!

Summary

In this video, Manish from Jagoinvestor introduces the concept of 'Nano Allocation', a term he coined to describe the act of allocating a very small percentage of one's portfolio to an investment product. While such an approach might seem diversified, Manish argues that it dilutes the impact of the investment on the overall portfolio, whether the return is positive or negative. Instead of spreading investments too thin, he advises on making more substantial and meaningful allocations that can have a real impact on wealth generation. Watch the video to learn why nano allocations can be a waste of time and how to better structure your investments for significant growth.

Highlights

• Manish coins the term 'Nano Allocation' and explains its meaning. 🆕
• He discusses the insignificance of a 1% gain or loss in a large portfolio. 🤷‍♂️
• Emphasizes the importance of substantial allocations that move the needle. 📊
• Highlights the common mistake of spreading investments too thin. 🚫
• Shares examples from personal experiences and real-world scenarios.📚
• Urges investors to reevaluate their portfolios and make impactful decisions. 👍

Key Takeaways

• Nano allocation is the new buzzword! 💡 It’s about investing tiny chunks of your portfolio in random assets. But is it worth it?
• Even if a nano investment doubles or tanks, it scarcely impacts your portfolio. So what's the point? 🤔
• Size matters in investing! Make sure the allocation is significant enough to make a difference if it performs well.📈

Overview

Introducing a fresh term in the investment glossary, Manish from Jagoinvestor.com presents the idea of 'Nano Allocation'. Think of this as diversifying your financial portfolio by adding a bunch of trivial investments—funny term, seems legit, right? Sadly, it often doesn't hold weight when push comes to shove in financial growth.

In this insightful discussion, Manish explains why splurging on pint-sized investments won’t push your wealth growth into the fast lane. Picture this: you invest a tiny fraction of your wealth expecting big gains. What if it performs stupendously? But alas, the greater impact on your portfolio is tantamount to 'meh'. Kind of deflating isn’t it?

Channeling his seasoned expertise, Manish suggests shifting focus from tiny, insignificant investments to hefty, deliberate ones that could jazz up your financial status in a meaningful way. He even dives into cautionary tales and personal anecdotes, urging viewers to rethink their strategies and shoot for investments that spell real progress!

Chapters

• 00:00 - 00:30: Introduction to Nano Allocation Introduction to Nano Allocation: This chapter introduces the concept of Nano allocation, coined by Manish from JagoInvestor.com. Unlike traditional asset allocation, Nano allocation involves dedicating a very small percentage of one's net worth, as little as 1%, into a particular product or category. This approach allows investors to experiment or diversify without significant financial risk.
• 00:30 - 01:00: Issues with Nano Allocation The chapter discusses the allocation issues related to various investment products within a portfolio, as wealth and portfolio size increase. It mentions different financial products like EPF, PPF, Sukanya Samriddhi Scheme, mutual funds, AIF, PMS, ESOPs, and NCDs, emphasizing the need to strategically allocate a percentage of the entire portfolio into these products.
• 01:00 - 01:30: The Mental and Practical Burden of Minor Investments This chapter discusses the mental and practical burdens associated with minor investments. It highlights the necessity of creating logins, monitoring accounts, and managing documentation for even small investments, which can consume both mental and financial resources. The chapter suggests that despite the potentially small size of these investments within one's portfolio, they demand attention and action repeatedly. The rationale behind these investments, like all investments, is the potential for them to perform exceedingly well in the market.
• 01:30 - 03:00: Minimal Impact on Portfolio Growth This chapter discusses the concept of minimal impact on portfolio growth when investing small amounts in high-return products. It explains that even if a product performs exceptionally well, a small initial investment won't significantly impact the overall portfolio. For instance, if only a tiny fraction of your total investment doubles in value, the effect on the overall portfolio remains minor, despite the high performance of that specific product.
• 03:00 - 04:00: Example of Ineffective Small Investments The chapter 'Example of Ineffective Small Investments' discusses the impact of small investments within a larger investment portfolio. It highlights a scenario where a small investment doubles in value, but due to its tiny proportion in the overall portfolio, it doesn't significantly affect the overall portfolio value. The chapter points out that both positive and negative outcomes of such small investments are often negligible in the grand scheme of investment portfolios.
• 04:00 - 05:00: Personal Mistake in Nano Allocation The chapter discusses the concept of 'sizing' in stock investing, emphasizing the importance of allocating a reasonable and decent amount of wealth into stocks when building a portfolio. It highlights the scenario where an investor might panic upon observing a minor decrease in value, such as 100 becoming 99.5, but assures that such small fluctuations are normal and do not signify major changes in the market.
• 05:00 - 05:30: Advice on Effective Portfolio Allocation This chapter discusses effective strategies for portfolio allocation emphasizing the impact of investment size on overall portfolio performance. It highlights the importance of having significant allocations in successful investments rather than minimal involvement. The speaker provides a narrative about investing in a high-performing stock with an insufficient amount, leading to negligible impact on a large total portfolio. This serves to underline the need for courage and conviction in investment decisions to ensure meaningful growth across the entire portfolio.
• 05:30 - 08:00: Conclusion and Rare Exceptions The chapter discusses the concept of portfolio management, specifically addressing a situation where an individual has a portfolio size of 5 crores but has not effectively utilized it. The emphasis is placed on the missed opportunity of making impactful investment decisions when the portfolio was smaller, at 1 crore, with the suggestion of allocating 10% towards investments being a significant move. The conversation highlights a common scenario faced by clients who diversify their portfolios into several categories, hinting at a need for strategic investment decisions rather than overthinking or hesitating.

Nano Allocations: Why this portfolio allocation mistake will waste your time and energy! Transcription

• 00:00 - 00:30 hi investors Manish here from Jago investor.com today I'm going to talk to you about Nano allocation now You Must Be Wondering ah this seems like asset allocation but what is nano allocation I'm sure you must not have heard about it because this is the first time I'm coining the term Nano allocation so what is nano allocation in simple terms it simply means allocating very very small portion of your entire net worth into a product or into a category so for example 1% of your
• 00:30 - 01:00 portfolio 5% of your entire portfolio into some some product so see what happens as our wealth increases as our portfolio size increases whenever we add a product whenever we it can be EPF ppf Suk Sami scheme mutual fund aif PMS P what else esops some NCD something like that okay we have to
• 01:00 - 01:30 create a login we have to monitor it there's some documentation the password it occupies our wealth space because your money is allocated there but it also occupies your mental space you have to think about it you have to do something about it again and again and again now if it is a very small part of your portfolio the problem is that if it does very very well because that's why we invest right most of the people why
• 01:30 - 02:00 they are investing they are buying a product because they want to earn high interest High return they want it to do very very well now the problem is if you if you have done a nano allocation into something and if it does extremely well extremely well its effect on your entire portfolio is not that big so if out of your 100 rupees you have invested one rupe into some product and next month or next year it is doubled let's say for example you'll feel very good about it
• 02:00 - 02:30 wow I'm genius I've done something but then how much your portfolio has gone up so your 100 rupes portfolio has gone up to1 assuming other things have not done so what what did you do ultimately what did you do nothing you have doubled your that investment but that is a very Nano allocated of your entire portfolio and you will not feel too much about it now what if it does very very bad let's say it l 50% of its wealth and
• 02:30 - 03:00 you're like oh my God what has happened and then you see that oh nothing has happened your 100es has become 99.5 so the point is nothing is happening neither on the upside neither on the downside nothing is happening the in in stocks in Stock Investing there's something called a sizing and that is the exact same thing that when you build a portfolio you have to allocate a reasonable decent amount of wealth into to some stock so that
• 03:00 - 03:30 when it does very well your entire portfolio moves up by a respectable amount okay there's no point of you know buying a 10 bagger for 10,000 rupees when your portfolio is like 2 CR rupees you bought few stocks just trying out you you because you didn't have the courage you buy a small portion let's try it out it does extremely well and you you you're telling the world ah man it's my investig you know I bought I bought uh Dart in IPO how much one lot
• 03:30 - 04:00 what is your portfolio size 5 crores you've not done anything okay you just wasted the time You' you've just thought too much about it the real thing was when you had a 1 CR portfolio and you had allocated 10% 10 lakh Rupees if you had invested then it was some big decision okay what are some other examples so I see a lot of our clients when this when we see their portfolio there are six seven eight things and then there is one small okay what have you done I have
• 04:00 - 04:30 started NPS also okay okay how much I've started uh I put 15,000 in it what is your portfolio it is 2.6 cror why what is it doing you just feeling that oh I have invested in one more product do you have NPS yes yes I have NPS also oh you have invested here also yes yes I have invested here also trust me it is not helping you okay just get rid of it just simplify your portfolio and uh just don't fall for this whole
• 04:30 - 05:00 thing um then there are you know uh if if you talk about my own mistake I also did this mistake and I invested into a small company where I got a share a direct investment and it was like and now I'm like I'm stuck with it man what will I do with that even if it becomes 10 times it's a small allocation I'm not done done nothing
• 05:00 - 05:30 great so when we invest into something we just talk about the product its features its potential so don't think like that okay it's it's not a right mindset to create wealth have four things have good portfolio coming to mutual funds again the same thing happens how much is the portfolio I one CR portfolio Okay how much is this fund this fun has 20,000 rupees one time why why don't do it
• 05:30 - 06:00 have 20 lakh rupees in five funds okay have 10 lakh rupes in 10 funds that is fine have 5 lakh rupes in one have 2 lakh rupees okay two lakh is what 2% no no no don't have two two lakh but you got my point I think I I'm just saying that you know don't have a insignificant portion in something where it will just not matter to you okay and what happens I'll tell you another reason once you have a very Nano allocation
• 06:00 - 06:30 you're not going to take care of it you are just not bothered just imagine someone and just imagine an NRI who is outside India living there for 10 years and the father has bought a plot of land for 6 lakh rupees let's say for for his son or for his daughter who is living outside okay outside they have $1 million Corpus so it is like 7 CR rupes Indian rupees okay maybe after once they
• 06:30 - 07:00 get old after 10 years they will have $5 million portfolio Okay that is 35 crores how much plot of land is there in India 20 lakh rupees okay how much is the portfolio percentage it is 3% okay what is to be done with that okay we have to sell it now there is some issue with it some signatur has to be done some someone is encroaching it what the person will do they will not do anything they will say
• 07:00 - 07:30 it's like a tiny portion so I think I have made the point uh it's something which very natural it happens but I really want you to think about it and don't fall for Nano elocation whenever a new investment opportunity comes first you evaluate the product is the product worth it first thing does it make sense in your financial life is it making sense for your financial goals if yes the next thing you have to ask is how how much are you ready to commit to it
• 07:30 - 08:00 amount wise and the percentage of the portfolio wise okay see if you are the exceptions are there if someone had allocated 1% in their flip in in 10 15 years back in let's say flip cart there was a seed round and you had to invest some small portion in flip cart today that one person is like 90% of your portfolio or maybe 99% of your portfolio but this happens where
• 08:00 - 08:30 in reality does it happen with majority of the people no it is like a very rare instance these are all outliers please don't fall for it and just forget about it okay so make sure you relook at your portfolio and don't fall for ano location please forward this video to all your friends who are you know always telling you oh I got this i got this mutual fund I got this stock I got this product I have invested here also and there also I'm sure they are going to get you for this video bye