personal finance

Where to invest if you are an inexperienced investor: Dhirendra Kumar

Investors who have never been to the equity market and are thinking in terms of five years and more, should get

started with a balanced fund, two-third equity, one-third fixed income. That will safeguard against the big shock which drives you out of the market, Dhirendra Kumar, CEO, Value Research, tells ET Now.

Edited excerpts:

Should one scale back or add a bit more to their monthly SIPs?

Investors should keep calm and carry on. If you are investing for three, five or ten years, which is how a goal-oriented investment in a mutual fund should be, then you do not need to worry about it. In fact, one should feel happy about it that you are able to buy cheap and hope that in future it will be worth much more and you are able to accumulate your mutual fund units much cheaper.

But that is easier said than done. The psychology is very much against us. We want our investments to do well continually. We want our investments to do well for the period that we are investing. At the same time, even in between, we want it to be performing in a very nice straight line if possible. That does not really happen. Equity gets reward for absorbing the turbulence that comes on the way but at the same time, I do not see a panic simply because the kind of investors who have come over a period of time and the gradually build up of SIPs.

For last two years, we have been talking about the SIP momentum starting from Rs 3500 crore a month to steadily going up to Rs 8,000 crore a month. Also the mechanics have changed. Earlier, people used to do some kind of term recurring deposit, two-year SIP, one-year SIP and after that they thought that the default was to reconsider. Now what you do is you give ECS mandate and for perpetuity, till you stop it, it will be on. Many fund companies have also started the step up SIP. You invest starting with Rs 5000 or Rs 10,000 and then ask for SIP to be increased by 8% or 10% every year.

Those are the investors who are not coming back. Getting the naïve and uninitiated investor in the market is proving to be hard because they are not coming back and looking at their investment value every day. That is the very initial stages of main streaming of mutual fund which is a great comfort to the market. They have been reasonably able to balance the FII massive outflows that we have seen so far. In last four trading sessions, Rs 9000 crore have gone out — a massive exodus. Despite that, the kind of resilience that market has demonstrated is entirely on account of the steady SIP flows.

Would SIP flows remain on the positive side in the coming months?

The other side of this market is that opportunistic investors have stayed away from the market for a while. Every fund manager has been saying that there is a dearth of opportunity, good companies are not available cheap and even average companies are not cheap. The steep correction in different segments of the market might present an opportunity. There are opportunistic mutual fund investors too. Most investors lose their Rs 5000-10,000-15,000 SIP but they are not a big force. They provide the resilience to the market, the whole momentum. The build up to Rs 8000-crore monthly inflows is very comforting but they really do not turn the market.

Should the SIP numbers continue and lump sum amount may see a big variation?

What we have witnessed is that the gradual build up to the SIP momentum has been rising. That might decelerate. We have seen that on a month-on-month basis but I do not see a decline. I see that only decelerating because curiosity is driven by that Mutual Funds Sahi Hai campaign and when investments do well, investors come to market in larger numbers. Except for that, I do not visualise any kind of turnaround, that tomorrow onwards investors are going to discontinue their SIPs or a sharp turnaround in the way money has been flowing into mutual funds.

Recommend one mutual funds that offers safety, especially if risk appetite has been scaled back?

I do not have that one fund but I broadly see three kind of investors; investors who have some experience of market. They have been around and they are getting shaken by this and accidently they have landed in some fund. Those investors should continue with one or two multicap funds, start their SIP and not get unnerved by the market.

Investors who have a little less experience and have never been to the equity market and thinking in terms of five years and more, should get started with a balanced fund, two-third equity, one-third fixed income. That will safeguard against the big shock which drives you out of the market.

An extremely conservative investor with a five-year time-frame, who is trying to enhance his return with superior inflation adjusted return and is still in the accumulation phase, should consider the equity income fund, one or two and be at it.

So equity income fund for a very conservative investor; investors who have no experience of market and are looking at long-term growth should consider balanced funds; one or two multicap fund for one with little experience. There cannot be a better time to start than now.


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