If you are in your early 20s or you’ve just started your career, it is entirely possible to be overwhelmed and confused at the deluge of financial advice coming your way. But fret not, because mutual fund industry veteran A. Balasubramanian, MD and CEO - Aditya Birla Sun Life AMC, has some insights from his 26 plus years of market experience to get you started on the right track. Read on:
Stick to the basics
Digitization has completely transformed the way investing happens. From gathering information to processing and dealing with its practical applications, there is a whole new world of opportunities and possibilities for millennials. With a wide range of fintech platforms like Groww, Paytm, and more bringing investing to fingertips, the process has only been simplified and accelerated by conducive, enabling government policies. But Balasubramanian suggests circling back to the basics.
“But it's simple, 1 plus 1 is always equal to 2, irrespective of time and age. Similarly, basic investment principles remain unchanged, too. And the best way to begin is to clearly identify and classify your needs, be it short-term or long-term in nature, and allocate your investments accordingly. Building your portfolio focussed on your purpose, needs and a long-term perspective will help you achieve your goals and generate wealth in the long haul.”
Keep an eye out of trends, but don't get swayed by it
No trend lasts forever, and that's why it's all the more important to be in the know of all that is happening. This is all the more pertinent when it comes to a rapidly evolving economy like India, where new trends like digitization and sustainability are increasingly being adopted in investment practices.
With the post-pandemic world shifting to a hybrid work model and the economy inching towards a 5 trillion dollar figure, the cyclical revival of certain sectors of the economy cannot be discounted. In fact, the 2021 Trendspotting report by Aditya Birla Sun Life AMC highlights that based on the analysis of market data since 2002, the top-performing sectors have varied across each market cycle. Take a look :
| Phase | Top-performing sectors |
| October 02- January 08 | Industrials |
| January 08- October 08 | Consumer Staples |
| October 08-November 10 | Media |
| November 10- August 13 | Healthcare |
| August 13- February 16 | Auto |
| February 16- January 20 | Consumer Durables |
Per Balasubramanian, experimentation and keeping abreast with all the latest progressions is a must, but one should avoid leveraging and speculating. With new companies and startups capturing the market imagination and existing companies maintaining their competitive edge, it is tough to keep away from the market. Millennials should consider building a sound investment base before trading in volatile market instruments like futures and options is essential.
Set realistic expectations
According to Subramaniam, one of the fundamental learnings that he learned over his investing journey is to understand and lay down pragmatic valuations and expectations when it comes to returns. In fact, this is also one of the basic tenets of the Oracle of Omaha. When it comes to identifying value companies, the price of stocks trading 25 percent below their intrinsic value is a key indicator.
The veteran recalls how he witnessed one of his initial mutual fund investments trade 10x the NAV (Net Asset Value) but ultimately had to sell the same at a slightly reduced value of 7x. Per him, no company can trade beyond their book value after a certain point in time. Hence, one must understand the business's basic business and financial intricacies before investing.
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