Radhika Gupta’s 4 investing steps to financial independence

At 38, Radhika Gupta, MD and CEO of Edelweiss Mutual Fund, is the youngest top executive in the Indian mutual fund industry. She understands the challenges young CEOs face, when managing their own money. Here is what you can learn from her financial journey.

Being conservative with debt

It might be tempting to opt for debt when the going is good, but debt can hurt the most when matters don’t proceed as planned. As someone who works in a business linked to the capital markets, where things can change quickly, Gupta says she fully understands the importance of being conservative.

“I don’t even take leverage to exercise my employee stock options. The only place we have had leverage is home loans, which I think is a form of leverage that should work for everyone. With interest rates being low, it works even if your investment portfolio earns 9-10 percent returns,” Gupta says. She is especially averse to using leverage to buy equities.

Diversifying across different assets

When Gupta started earning in her 20s, she, like most others, believed that sticking to equity was the best policy when a person is young. However, she now understands the importance of making allocations to different assets classes. “As a family, we have made our asset allocation a lot more conservative. We have a significant amount of money in balanced advantage funds, which form the core of our portfolio. Additionally, we have some small satellite allocation to mid, small-cap and international funds. We have been investing in international funds since we moved back to India in 2011,” she says.

Keep it simple and invest regularly

Gupta uses systematic investment plans (SIPs) to do her mutual fund investments. This ensures that every month, she is investing her money. She also invests any bonuses or one-time cash inflow in these same schemes as a lump-sum investment.
“Just by doing our SIPs, our portfolio has built up much more than what we had expected. Our SIP returns on a product such as BAF has been 14-15 percent. I believe an SIP is a simplest way of doing things and you get a better outcome than you expect,” Gupta says.

Enjoy your money, but don’t ignore savingGupta says it is important to start your investment journey early. She adds that it is okay for youngsters to enjoy their money, but at the same time, don’t ignore saving.

She says that youngsters should not worry too much about making mistakes. “It is okay to make a few mistakes when you are young. So, when you are older and have more surplus money to invest, you are wiser,” she says.

However, Gupta warns that in today’s times when there are several self-proclaimed experts on social media, people should not get carried away by random tips or advice. “Investing is a serious business. You should try and do a bit of your own homework before investing,” she says.