CNBC-TV18's Informed Investor, in association with the National Stock Exchange, strives to narrow the gap between investors and their investments, so that their money is always working for them.
CNBC-TV18's Informed Investor, in association with the National Stock Exchange, strives to narrow the gap between investors and their investments, so that their money is always working for them. But it isn’t always as easy as it sounds. Every investor has their own unique requirements and risk appetites and therefore it is imperative that every portfolio be designed keeping this details in mind.
This where Informed Investor steps in to help educate our investors about: Where to invest? How to invest? How to go about investing? And how much money should be devoted to each asset classes?
One of the things that we heard over and over again when Informed Investor series started is: "It's never too early to start investing". Therefore, the best way perhaps to put this into practice would be to encourage younger people to begin investing.
This week, Informed Investor is at the Monjee Institute of Management Studies in Mumbai and to interact with students, as well as professors here, to find out what is that they would like to know about their investments.
And helping us in our effort to create informed investors, two of the leading financial minds in the country: Rajiv Anand, MD & CEO of Axis Mutual Fund and Amisha Vora, Joint MD at Prabhudas Lilladher.
Below is an edited transcript of show achored by CNBC-TV18's Sumaira Abidi. Also watch the attached videos.
Abidi: I want to come and ask you one of the basic questions coming from a professor. They’re a group or a community that have a regular income, but perhaps not a very high risk profile. Are there any products that are directed at them or something that they could invest in?
Anand: One needs to look at balanced portfolio. One tends to put money away in fixed deposits for example and believe that that’s investment and fixed deposits on a post-tax basis are not even beating inflation. So, one needs to start investing surpluses with a balanced portfolio. You can have money in liquid funds, which give you day-to-day liquidity and at attractive returns and give you tax breaks.
You must have some money in equities — whether it’s 5-10-15% of your money — you must put some money in equities because that’s the only away to beat inflation. In the current context, like every other Indian, we must have some money in gold as well. Now, whether you buy gold in the form of physical gold or ETFs or gold funds, I think some portion of your portfolio in gold certainly make sense. Put it altogether and you’ve got regular savings.
Abidi: I want to ask you about the students. They are generally in a age group, which one would imagine would be a very high appetite for risk. This would translate to equity. But we did a lot of off-camera interactions with these students and we found that perhaps nearly half or about 52% odd of students weren’t willing to take risk even after conducting adequate research. There was a very negligible amount who described themselves as a real gambler or a risk taker. Where does the balance lie for someone in this age group?
Vora: I think that equities do have risk in short-term, but when you build for medium to long-term equities, have a tendency not to perform linearly. So, one-year will be negative, next year could be positive or balanced and third year can make up for the balance of the last two years plus the return on the debt. Now, whether that gets done in the third year or fifth year — so earlier you start investing your responsibility for regular income is less. So you can bide the time when the equity is not giving a very linear return and still manage to beat inflation and create wealth because equity is the only way you can create wealth.
Abidi: We are the management institute and one would imagine that students and professors here would have a higher analytical skills. Would they be better positioned, therefore I imagine, to analyze the news that comes in and the news flow on certain equities, stocks or whatever investment vehicles? Would you advice therefore a higher allocation to them because they are better able to dissect the news flow?
Anand: Being an Informed Investor is critical, especially when you are going into a fairly volatile asset class like equities. However, remember that you are not really buying the market; you are becoming a shareholder of a company. Therefore, you should do a adequate research in terms of what the company does, read the company’s balance sheet, have a regular understanding of that particular industry and so and so forth. If you can do that, you can over a period of time, be able to build a portfolio of high quality stocks. If you can’t do that there is really a very simple way to do it, you can buy into diversified equity mutual funds. We do that all the time. So, enjoy life have fun and outsource your money making to mutual funds that’s a good way to do it.
Abidi: Let that be someone else’s headache?
Abidi: If you start investing early, how can you then scale up investments with rising incomes, is there something that needs to be followed?
Vora: I would say that when you start investing early that is the time when probably your responsibilities are limited, your recurring income is met by your salary or whatever other remuneration that you get. So at that time, you can probably put amount into equity but as you keep growing, probably other classes of assets be it real estate, be it sometimes gold, as you keep growing further the debt part for complementing your regular income, which is what will keep coming in. The early investments into equity in your career would help build some reasonably respectable corpus.
Abidi: As we grow older like you are suggesting a good idea is to keep changing allocation to vehicles that suffice your risk or your appetite at that point in time. In fact, this is starting early is also a view that Debasish Ghosh who is the Head of Capital Markets Center at NMIMS is also echoing.
Debasish Ghosh: While they are in the programme, we do try to inculcate the habit of investing by exposing them to stimulated stock trading programmes. We try to encourage them to start investing in paper format not actual trading. We hope that after they go through that experience, they actually start investing. Once they are working, we expect them to invest initially in largecap stocks, that is what we say that is risk-averse kind of investment. As they start making probably initial money by making investments in some largecap stocks, probably then they should look at midcap and smallcap that is the way we have been trying to propagate the equity culture.
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