Deepak Sharma, Executive VP at Head Investment Advisory Group, IL&FS Investsmart said gold as an asset class has to be used strategically. "Gold can form around 5-10% of one's portfolio. The gold cycle in slightly longer than other normal asset classes like equity. So, investors looking to invest in gold via the SIP route, should look to stay invested for at least 10 years."

He advises DSP ML Top 200 or Kotak K30 and Sundaram Select Focus systematic investment plans to investors looking at investing in long-term, largecap diversified funds. "Investors should look to stay for at least five-six years in equity investments. Two-three years is like trying to time the market. Equity investments should have a longer view from an investment point."

He feels ULIPs are useful for retail investors, who cannot differentiate between insurance and investment, due to lack of guidance, advice, or maybe time. So, sometimes these ULIPs makes a lot of sense for investor to invest in."

Excerpts from CNBC-TV18’s exclusive interview with Deepak Sharma:

Q: What should investors be doing at this point in time, if they are invested in debt funds?

A: At the current stage, the yield has risen to 9.5% levels on the 10-year Government Securities side. With respect to inflationary numbers and the RBI stance, there are speculations on what RBI is going to do on the coming October session. But a rate of 9.5% on the 10-year is pretty comfortable.

Unfortunately for the investors, as fund managers are taking their own precautions to manage their average maturity and duration of the portfolio, most of the bond funds are almost below one-year of average maturity. Birla Income fund is having around 1.5 year of average maturity in their bond fund. So, even though investors are suggested to take some push in their portfolios, the options are very limited.

Q: What should the investors be doing? Should they shift to funds for longer maturity once they feel the interest rate cycles peak?

A: Yes, if not the peak then we are somewhere around that. So, from here onwards investors who have an origin of more than one-year can put something around 15-20% of their portfolio into bond funds and shift their cash into their debt. But when it comes to the choices, they are very limited for the investor.

Q: Which is the gold fund and Systematic Investment Plan (SIP) to invest in?

A: Gold as an asset class is good to hedge against inflation. If one looks at the last one-year returns on gold; it has almost grown from Rs 8,700 to Rs 13,000 in rupee terms. That is the best asset class, which has produced more than 40% return in a year.

I would recommend that this asset class has to be used strategically. As far as SIPs are concerned, one can look for some largecap funds to use as a tool like DSP Top 200 or Kotak K30 or Sundaram Select Focus.

Q: What is the percentage of their mutual fund portfolios that investors should be having in gold; either in gold Exchange-Traded Funds (ETF) or maybe physical gold?

A: It is all about individual personal risk profiling and the aspirational desires of individuals; what he wants to do with the money and the kind of risk he is ready to take for that. On an average, gold can be at least around 5-10% as a part of the portfolios.

Q: Would you suggest that inventors put in a systematic investment plan even in a gold ETF or gold fund like AIG World Gold or DSP ML World Gold Fund?

A: The cycle of gold in little longer than the normal asset class like equity and others. So, if the investor is trying to put SIP in gold, the number of years has to be much more than equity. So, he should look at ten-year or something like that. 

Q: Would you suggest anything for Franklin Flexi Cap?

A: This fund is there for more than three years in the market now. As on June 30, the portfolio indicates that 80% of the stocks are from the largecap and 20% is more midcap and small cap. It is a good fund and it goes inline with where the market seems to be a little volatile. The largecap is the only cushion where investors should be looking at. So, it makes a lot of sense to be in this fund.

Q: Are there any other fund from the Franklin stable that you have in mind on the equity diversified scheme?

A: Franklin Bluechip has a very long track record among the Franklin schemes. This particular scheme has been purely looking at the largecap stocks. So, that is another option people can look at.

Q: Given that technology has about 31% of exposure of the total asset size, do you think that kind of an exposure will work in sectoral preference or towards a particular work and the overall asset size of the fund? Does that work in a market like this?

A: On diversified funds, the sectoral allocation is more of a call of the fund manager, which they keep on changing dynamically for the market scenario. Recently, even the technology sector has paid well to the investors.

Q: What is your opinion on LIC Profit Plus and what should one be doing?

A: LIC Profit Plus is a Unit Linked Insurance Policy (ULIP). It is not a plain vanilla mutual fund. I hope the investors are aware of it. Within this ULIP, there are options given to the customers; one can opt for the bond portfolio, secured fund portfolio or balance and growth. So, it depends what kind of a portfolio one has opted within in this particular scheme.

If one is on the equity side, one would know that any equity portfolio takes long to make wealth out of it, if one has a time horizon of 6-10 years. Normally, the scheme is for 10 years and that makes sense. If one is there in the same scheme, then one has done good job and should be in the same scheme.

Q: On an average, would you advice investors to look at ULIPs for wealth creation over a longer period of time? Should investors be dividing their insurance needs and investing needs into separate vehicles?

A: There are two different decisions; covering risk as well as making money. So, investment and insurance are two different propositions. Typically, investors should look at that. But these kinds of ULIPs are useful at a retail investor level where one cannot differentiate these two needs because of a lack of guidance, advice or maybe time. Sometimes, at the retail level, these ULIPs make a lot of sense for the retail investor to invest in.  

Q: What are the top picks for the mutual fund or SIP to invest in?

A: I am always for SIP and the diversified long-term largecap fund. In this category there are enough choices. But I am strongly looking at funds like DSP Top 200, K30 and Sundaram Select Focus.

Q: Would you advice to look at largecap funds and at least have a 2-3 year time horizon?

A: I always prefer that investors should look at least 5-6 years to be in equity investments. Two-three years is like trying to time the market but equity investments should have a longer view. 

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