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DAILY VOICE | Samvat 2077 will be remembered as the year when Indian investors went global: Viram Shah of Vested Finance

For the new SAMVAT, investors should focus on building a strong diversification foundation for their portfolios. This foundation is built on four diversification pillars: asset, time, industry and geography.

November 02, 2020 / 08:52 AM IST

Viram Shah, who is a CEO and Co-Founder of Vested Finance, said that Samvat 2077 is going to be remembered as the one when the Indian investors went global.

Ahead of US elections, Shah is of the view that Joe Biden could also ease concerns about the trade war with China leading to a positive impact on global trade, he said in an interview with Moneycontrol’s Kshitij Anand.

Vested Finance is a California-headquartered U.S. Securities and Exchange Commission (SEC) Registered Investment Advisor (RIA) that provides an online investment platform that enables Indian investors to invest in the US stock market.

Edited excerpts:

Q) What is your call on US markets & earnings which are on the verge of hitting fresh record highs? And, will we be able to sustain it?

A) While earnings reports have been better than expected, election expectations and rising COVID numbers drove the volatility in the US markets over the last week.

Close

In terms of market performance for this week, judging based on the historical trend, the week before a presidential election is good for stocks. Since 1928, the market has risen 70 percent of the times in the last full week before the contest.

In the ongoing earnings season, nearly 7 out of 10 (70%) companies from the S&P 500 have beaten expectations for both revenue and profit, a number that is typically 40%.

This means that company performance has actually been stronger than analyst expectations. With Apple, Amazon, and Facebook all set to report earnings this week, any surprises could add to additional volatility to an already choppy market.

Looking at post-elections months, company earnings will stay under pressure until COVID is not resolved. With 10 potential vaccines in late-stage trials globally, restrictions could start getting lifted worldwide by mid-2021 helping earnings normalize by end of 2021.

Q) Your message to investors for this Diwali? And what would you say try international investing for new SAMVAT?

A) Firstly, please stay safe this Diwali!

SAMVAT 2077 is going to be remembered as the one when the Indian investor went global. That’s what we’re excited about.

Last year when we started, the majority of the questions investors would ask us were around the legality of being able to invest internationally.

Now these questions have moved towards - how can I invest and what are the costs involved. That’s a big shift in investor education.

For the new SAMVAT, investors should focus on building a strong diversification foundation for their portfolios. This foundation is built on four diversification pillars: asset, time, industry and geography.

While we have been diversifying across assets (gold, real estate, equity), time (via SIPs) and industry (IT, pharma, banking, and more), geographic diversification has been missing from our portfolios.

We’re largely concentrated in one country and one currency. Let’s work towards changing that over the next year.

Q) What is the importance of asset allocation and why is it more relevant when Gold and probably global investing might have delivered better returns than domestic equities?

A) Asset allocation helps an investor balance their portfolio risk. As an investor one of the concepts that is not understood well enough is risk-adjusted returns.

One should not look at standalone returns while evaluating their portfolio, but also look at how much risk they took to earn that return. While a concentrated portfolio can give you higher returns, the risk of losing capital is also much higher.

Portfolio creation becomes easier and more disciplined when looked at from an asset allocation perspective. Based on one’s risk profile, the % allocation is determined, and irrespective of market movements that allocation should be maintained.

Your risk-adjusted return becomes better if the underlying assets in the portfolio are not correlated to each other (i.e. the returns don’t move similarly all the time).

This is where gold and global investing become an important part of one’s portfolio. The Dow Jones has a correlation of 0.36 with the Sensex. Adding these asset classes to your allocation can help one get similar or better returns while taking a lesser risk.

Q) What should be the ideal strategy now ahead of US elections?

A) Making any investment decisions based on who is going to be elected is a tricky strategy to employ.

Elections are likely to lead to short-term market swings those will be inconsequential over the longer run. One should stick to their long-term strategy.

An interesting fact, historically under a Democratic President (Joe Biden’s party) the S&P 500 has given an 11% annual return vs. under a Republican President the annual returns have been 7%.

Q) How will markets react if Donald Trump wins the US elections? Would that be good for equity markets? What is street factoring in?

A) There are certain industries that might get affected more than others depending on who wins. Trump plans to spend the US $1 trillion over the decade on transportation infrastructure (bridges, waterways, roads).

In order to pay for this additional spending, while enacting more tax cuts, he plans on cutting government spending on defense, healthcare, education, and social welfare programs. Trump also has ambitious plans to resuscitate the oil industry in the US.

Trump also plans to reduce corporate taxes even further, this might lead to better stock market returns in the short-term in case he gets elected.

Q) How will markets react if Joe Biden wins?

A) If Biden wins the election, he plans to spend roughly US $3.2 trillion over the next decade. His plan includes a spending budget of US $750 billion to improve healthcare and the US $750 billion to revamp education.

The majority of his budget, about US $1.7 trillion, is to fight climate change. The massive spending plan will accelerate the adoption of electric vehicles and expedite the transition to renewable energy.

Shares of EV companies and the battery and the solar sectors might be positively impacted. Biden could also ease concerns about the trade war with China leading to a positive impact on global trade.

The current prediction on the street is a Democratic victory i.e. Joe Biden will become the next US president.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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