Investor behaviour is one of the most crucial aspects to a good investment experience, believes Kalpen Parekh who is the President at DSP Mutual Fund that manages an AUM of more than one lakh crore. So, BL Portfolio caught up with him to understand his financial journey and for his advice on the mutual fund investments in the ongoing phase of Indian stockmarkets.
What does money mean to you?
Money to me is comfort and responsibility to my family. It allows me the freedom to take the right decisions and confidence. It means gratitude and blessings to be able to have enough money to lead a good life. It also means responsibility to help others with money.
How does your portfolio look like now?
I invest all my money in DSP Mutual Fund schemes. The split looks something like this - 43 per cent in Indian funds , 17 per cent oin international equity funds, 16 per cent in dynamic asset allocation fund, and 21 per cent in short term debt fund. Apart from this, 5 per cent is in sovereign Gold bonds.
Everyone should decide their asset allocation with their own personalization, and not assume that this is the most optimal or ideal asset allocation.
I have recently shifted a bit of equity into debt under an asset allocation fund, which is conservative. I'm likely to buy a house in the next month and will require a certain amount of lumpy cash requirement, which is why 40 per cent component is in fixed income or asset allocation fund and not in an equity portfolio.
What is your most successful investment?
I haven’t invested in stocks since the last 13 years. My best investments are the ones that I made in 2008 -2010 phase of low or no returns and held on since then. They have compounded very well. These are simple flexi cap equity funds. Another investment that did well in hindsight is an equity fund which invests in US stocks.
What is your biggest money mistake and what did it teach you?
I used to invest in best performing funds of last year and when they would see reversal in their returns I would get out. It was a classic case of buy high and sell low and destroy your hard earned capital. It took me many years to realise this mistake. It taught me that performance has cycles and cycles mean what rises fast comes down too.
What’s your view on the market?
I have always been for the last few years, generally feeling a bit of anxiety that stock prices are running ahead of reality and fundamentals. Economic growth, world over or in India has been slower than what we tend to speak about. Some points in time, markets will be ahead of economy, some points in time they will behind the economy. Currently, they are ahead. Trying to make any prediction of the market has rarely worked for me.
Also, focusing on market is an external variable outside my control. With time and experience, I have learnt to focus more on what’s in my control - how much do I invest across asset classes, that is asset allocation.
Are investors better off pausing SIPs in the heated markets and instead investing in safer avenues?
By pausing SIPs now, you attempt to optimise the last drop of market cycles, but we're also making a big assumption that we know that markets are going to come down, but we don't really know. I think if we start with this belief that we know, then your choice of action will be very different versus if you start with the assumption that probably we don't know, as much as we think we know. I come from the second camp.
Your concern is valid that what if the next one your markets go nowhere. It's okay, who says that you have to make money every month? The reality of the markets is 1/3rd of the times they go down, one third of the time, they go nowhere - for long periods of time, it means zero returns for three, four or five years - and 1/3 of the times they go up violently in a very large quantum. The challenge is we don’t know which 1/3rd of the time you are going to encounter it in the next five years.
Typically, what happens is when prices fall, we find 10 more reasons to say why they should fall further. So it is very easy to stop an SIP. Will you be confident that you will start back at the right time? If you're confident go ahead and do it. But if you're not confident, avoid.
If you are concerned about volatility, or probably lower returns, I would say take one step lower. So instead of stopping SIP from an equity fund, do SIP in the next category - dynamic asset allocation fund, which has a slightly lower risk profile.
Any investing tips?
It is important to ask this question, “How we can become good investors?” rather than only saying that markets should be good. We always seek good markets, we seek good funds, we seek good returns, we should also add one more layer here, which is seeking good investing behaviour ourselves, what are the characteristics of good investing, being more disciplined being more long term and not getting afraid of volatility.
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