Got Rs 10 lakh to invest? Stick to short-term debt funds for near-term needs; quality equity funds via STP for long term: Girish Ganaraj

Girish Ganaraj, Co-founder, Finwise Personal Finance Solutions

The initial months of the new financial year are a good time to review your investment portfolio. As our equity markets turn volatile, investors panic and consider exiting. Amid this, a steady rise of influencers on social media doling out financial and investment advice is a concern for the regulator and is adding to investor woes, says Girish Ganaraj co-founder of Finwise Personal Finance Solutions, which was set up in 2013.

In a conversation with Moneycontrol, he shares his views on investing in the volatile markets with the investors and diversifying the portfolio. He also cautions investors following social media influencers to invest in the equity market.

Edited excerpts:

What's your advice to existing investors in the current market volatility?

Now, it is increasingly an interconnected world. So a global event that may not even have a material impact on our Indian economy will still impact equity markets and cause volatility. Hence, investors need to accept that volatility is a way of life. It may be a good idea to look at short-term volatility as the cost of getting good long-term results in investing.

The medium-term outlook for India is among the better ones compared to emerging markets. Hence, investors with a medium and long-term outlook should continue to invest in equities.

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If someone has never invested in equity markets, is now a good time to start?

There is never a good time or a bad time to enter the equity markets. Our advice would be to enter anytime but only if you are clear about how long you plan to stay invested. If you are investing in equities or equity-linked products, then we suggest that a minimum horizon of 5 to 7 years is appropriate. We have not seen people lose money when they have invested in a diversified equity portfolio over this horizon. Investors have made decent returns by investing for the long term.

There has been a steady rise of influencers on social media doling out financial and investment advice without qualification. What’s your advice to investors following these influencers?

I am assuming many of these influencers want to help you in your investment journey positively. But that said, there is always a danger in trying to compress everything into a 10-minute YouTube video. When you try to compress or simplify, then you lose sight of the long-term risks. So following a video or a tweet with recommendations from influencers can harm your investment journey.

I think it is best that investors seek help or advice from experts who have built their expertise over the years through experience and have skin in the game and an established existing practice built through references. When it comes to financial help, it's best not to seek quick fixes through social media influencers. Approach personal finance professionals with a qualification and years of experience, who can understand your goals and risk appetite. Your money is an important asset for you. Therefore, make sure it gets the best treatment.

When the stock market corrects, many investors sell in panic. What’s your advice to investors?

Selling in a panic is definitely not a smart thing to do, since when you sell good equity during crashes, you are converting notional losses into real losses. And you compound your losses further when you again buy at a higher price. As we said, managing your behaviour is one of the most important aspects of investing in the markets. Be prepared for market corrections and then enter to invest for the long term. Invest money that you are prepared to lose in the short term, knowing that it will come back. Once you are clear about this, you will take sharp downsides in your stride.

Assuming I have Rs 10 lakh, where should I invest?

Before investing, you need to check for two things. First, if you have a short-term goal of one to three years, then invest the amount in short-term debt mutual fund schemes or liquid funds. We recommend investing in high-quality equity mutual fund schemes which include large-cap, mid-cap, flexi-cap, diversified funds, etc, for long-term goals.

We usually prefer not to put in lump sums, irrespective of how the market does. We would recommend using a systematic transfer plan (STP) route to invest a lump-sum amount in equity funds because that gives peace of mind.

Apart from equity and debt, what are the other assets that you recommend?

We provide only incidental advice that people need when they come to us for investments. We recommend a wide bouquet of investment products, not just mutual funds. We help our investors diversify their money in portfolio management services (PMS), real estate investment trusts (REITs) and so on, fulfilling their needs and aspirations. REITs are a good option, but again need to be held for the long term, as they are volatile in the short term.

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With a slowdown in the global economy, do you think investing in global stocks or funds makes sense right now?

If you are investing for the long term, the best time to enter the asset class is when the short-term outlook is unfavourable. Hence, we continue to invest in good-quality global funds in identified geographies and sectors.