Got cash? Lakshmi Iyer of Kotak Investment Advisors helps you splash

Lakshmi Iyer, 43, was one of the earliest women to have broken the male bastion of the Indian Mutual Funds industry.

She joined Kotak Mahindra mutual fund in 1999 in the fixed income team, and then later headed its products and debt funds. Now, after having spent more than 20 years at the AMC, Iyer moves on to a new role within the Kotak Group. She now heads Kotak Investment Advisors, the investment advisory firm registered with the Securities and Exchange Board of India, India’s capital market regulator.

As a products head, Iyer is an authoritative voice in the money management profession, across asset classes including equities, fixed income, gold and also alternate assets, the latter of which would also now be Kotak Investment Advisors’ focus as it caters to the high- and ultra-high- networth individuals.

So what is Iyer’s recommendation these days for someone who has, say Rs 10 lakh to invest? In conversation with Moneycontrol’s Bhavya Dua.

Equity markets have been volatile so far. The Sensex has seen four peaks and three troughs this year already. Is this the right time to invest?

The two key ingredients before making your investment decisions are your time horizon and your risk appetite, despite the market conditions. Because markets can’t be dead and the heartbeat is going to be volatile. So it is important to gauge the factors which are under your control rather than trying to time the market to make your investment decisions.

So, for example, if you have five years with you, then the day on which you make the investment becomes irrelevant.

If you had to give broad guidance on where investors should invest, how would you recommend investing Rs 10 lakh today?

Everyone has a different risk appetite and the ability to withstand volatility, so there cannot be one size fits all here. But assuming there is an investor with moderate risk appetite, one should have at least 60 percent in equity, 30 percent in debt and 10 percent in gold. This allocation can be tweaked a little, depending on your goals.

What kind of equity investment would you recommend to someone with an array of long-term goals, and wants to enter the market right now?

The way the market is perched right now in terms of valuation, keeping all the global market sentiments in mind, I would recommend going for a large-cap kind of a strategy. It is also okay to even have flexi-cap funds which are slightly more tilted towards large-caps. These are shock-absorber strategies in uncertain global market conditions.

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A staggered way of investing in small- and mid-caps could be the way forward from here.

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Interest rates have been rising over the past few months. Some experts say that we are nearing peak interest rates. Others are saying some more hikes are around the corner. Debt funds have become a bit complicated. What strategy do you recommend?

There are two parts to it. One is, are we done with interest rate hikes as an economy? The answer is, probably not yet. But are we in a desperate situation like the US to hike rates? Again, the answer is no.

So keeping that in consideration and that the markets have already priced in so many aggressive rate hikes, it’s okay to position yourself into funds with a three- to four-year duration. So funds which have a portfolio duration of three to four years are a better bet right now to take advantage of some capital gains in the future because the economy has become really flat right now.

Talking about the economy, what do you think are some of the major threats we are facing right now? Should we be worried about inflation and recession in India?

An unstable global environment is a big risk. High inflation in the US, stagnant growth for the UK and the euro zone, and the geopolitical situations around are the multiple headwinds right now. Apart from that, our domestic fundamentals are reasonably robust right now, especially compared to the developed western world.

Even given the global scenario, we are seeing the young investors being more inclined towards international investment as well. Do you think one should have global exposure right now?

You can look at it as a diversification tool for your portfolio. It should not be your core strategy, it can be the tail of your strategy. Depending on your risk appetite, you can have 10 percent to 20 percent in global equities through international ETFs (exchange-traded funds).

What are your views on investing through alternate investment funds (AIFs) and portfolio management schemes (PMS), if someone has a lump sum to invest?

These are all ways to invest in the broader market, whether it’s fixed income space or the equity space. These are instruments for more evolved investors because of their bigger ticket size. These are more nuanced ways of investing across asset classes. There is nothing wrong in participating in these if you are aware of the risk and the longevity of deploying your money. You can invest in private equity, unlisted stocks or private credit, but it comes with embedded risks.

How many mutual funds do you think are ideal to have in one’s portfolio, since a lot of schemes have overlapping investments as well?

Ideally, there should not be more than four to five fund houses in your portfolio. I have five fingers on my hand, maybe if I had more, it would have looked very deformed. So I think that is the amount we can manage without making it cumbersome. So you can have around three or four funds in equity and fixed income and one index fund in your portfolio.

What does your own asset allocation look like?

Seventy-five percent of my portfolio is in equities, a little under 20 percent in fixed income and the balance in gold ETFs. A bit in real estate, in terms of the house I live in.

What is your one big investment mantra?

One that I use and tell people around me, especially young students, is to invest and forget. Go into a hibernating zone, and this will help you conquer two major emotions: greed and fear. This will help you reach nirvana for your financial goals.