Where to invest Rs 10 lakh today? 100% in equities, says this army man-turned-financial planner, if your risk profile allows

Col. (Retd) Sanjeev Govila, founder of Hum Fauji Financial Services, a financial advisory firm for people in the armed forces, believes that you should not let your emotions guide your investment decisions.

After serving in the Indian Army for three decades, Col (Retired) Sanjeev Govila opted for voluntary retirement in April 2010.

However, even though he bade goodbye to his career in uniform, he wasn’t yet done serving the country. Over the years, Govila had observed that the singular focus of most armed forces personnel was to serve the nation, which meant that they paid little attention to securing their personal finances during their years of active service.

Two years before retirement, Govila decided that he wanted to become a financial advisor, and his services would be reserved exclusively for those who serve in the armed forces and their families.

Along with his wife Bindu Govila, he set up Hum Fauji Financial Services, a SEBI-registered financial advisory firm. Today, his firm boasts of 3,300 clients in India and abroad, with assets under management of Rs 870 crore. Though Govila’s firm caters only to armed forces personnel, it does make an exception for widows from civilian backgrounds.

In a conversation with Moneycontrol, he tells us where and how investors with a lump-sum of Rs 10 lakh should deploy their funds at the moment.

The equity market is going through a turbulent phase. What should retail investors do in the current scenario?

As far as the market is concerned, it is volatile, that’s why it is called a market. An investor shouldn’t take long-term investing decisions based on how the market is doing today.

Before getting started with investing, one should understand their risk profile and financial goals well. Accordingly, the investments can be categorised under core portfolio (long-term) and satellite portfolio (short-term). The satellite portfolio should be made for very short-term goals, with money that you can play around with.

What would be your advice to an investor who is looking to invest a lump-sum of Rs 10 lakh?

If your goal is more than five to seven years away, then the entire amount can easily go into equity (even though the market is volatile at present). However, this is where your risk profile also comes in. If you are risk-averse, then you might not want to go full steam ahead into equity. In that case, you can consider hybrid funds.

What should be the ideal asset mix for an investor in the current scenario?

There is this rule of thumb of 100 minus age (which is used to determine the ideal exposure to equities), but I don’t subscribe to it. I associate investing with goals and risk profile. If your investment horizon is at least five years, and you are in your 40s, then 70 percent of your investments should go into equity. If you are even younger and fall in the age bracket of mid 20s to late 30s, allocation to equity can be even higher at 80-85 percent. But then the risk profile has to be dovetailed into it suitably, so that market fluctuations do not result in losing one’s good night’s sleep!

With the rupee depreciating against the dollar, and the increasing volatility in the currency market, what kind of international exposure should an investor aim for?

The only reason one should go for international investing is diversification. For retail investors, it is not easy to understand the dynamics of even the Indian economy and markets. It is tougher to analyse how countries such as Germany, Brazil, Vietnam or even China are doing. So this will be more of an asset allocation call than getting better returns.

What is your view on commodities like gold? And digital assets like cryptocurrencies?

One should not try to time the crypto market, no one has been able to. You should only invest in crypto with any surplus ‘mad money’ that you won’t require in the near future. And as far as commodities are concerned, gold, too, has been quite volatile in the past. One cannot classify it as a safe haven per se. However, you can consider a little exposure to sovereign gold bonds.

What should be the ideal asset allocation for someone right now, in the context of rising inflation, interest rates and a volatile equity market?

For someone in their 40s, who has time on their side, exposure to gold and crypto can be around 5 percent in each of these asset classes. However, one should just stick to cryptocurrencies such as Bitcoin and Ethereum. More importantly, you should direct 60 percent of your investible surplus towards equities, across large-cap, multi-cap, balanced advantage and index funds. You can allocate 30 percent to debt—ultra-short funds or low-duration banking/PSU funds till the time interest rates stabilise.

How do you invest your own money?

I am more on the aggressive side, as I don’t have any responsibilities anymore and have a good appetite for risk. Close to 60 percent of my portfolio is allocated to equity—40 percent through mutual funds and 20 percent through direct equity. Debt instruments comprise 20 percent of my portfolio, with international funds and crypto making up the balance 10 percent.

What is your one big investment mantra?

Don’t let emotions guide you. Emotions are the biggest stumbling block in our investing journey.