In war against inflation, you need both sword and shield to win: Kalpen Parekh

Protection, he says comes in the form of a multi-asset allocation where there are other asset classes or heroes as well who come to the help or support, either when the hero asset class (equities) may be slowing down or when they themselves are doing well.

When it comes to beating inflation, investing in equities is often considered a better bet, especially in the long run. But Kalpen Parekh, MD & CEO, DSP Mutual Funds, feels that in the war against inflation, while equities are the sword that can kill inflation, one needs to have a shield or a layer of protection. Parekh was speaking during a recent media interaction to announce DSP's Multi Asset Allocation Fund.

According to Parekh, without a shield, you will not be able to get ahead in the war. "While we are not trying to predict the market... this is just our assumption... we think that in today's market going in with just bravado will be less beneficial," he says.

This protection comes in the form of a multi-asset allocation where there are other asset classes or heroes as well who come to the help or support, either “when the hero asset class (equities) may be slowing down or when they themselves are doing well.” Parekh adds that left to investors, they generally gravitate to yesterday's best performing but away from tomorrow's best performing asset. With a multi-asset allocation, there are two inferences – it will always own the worst performing asset class. But it will also ensure it owns tomorrow's best performing asset class.

This can be explained by looking at how in stable and growing economies, it is not always equities that contribute the most in terms of returns in local currency, he says.

Over the last 20 years, while Indian equities and gold have done well, the case for multi-asset allocation is that it can be a safer bet as it provides a mix of different asset classes that perform well at different times, he says.

In their newly launched DSP Multi Asset Allocation Fund, Parekh explains that they included global stocks, precious metals & bonds as well as Indian equities, thus enabling investors to take advantage of the varying cycles and eventually help investors stay invested in the fund for longer due to low fluctuations as against a single asset class.

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