Top investment and personal finance experts share their perspectives on money management, provided pertinent advice on where investors should allocate their funds, what they should avoid, and what long-term returns they could reasonably anticipate from their mutual fund investments.
Allocation of assets
Depending on an investor’s goals and risk tolerance, all financial professionals emphasized the need of using an asset allocation technique.
The executive director and chief investment officer of ICICI Prudential Mutual Fund, Sankaran Naren, expressed concern that although asset allocation is a topic that is frequently discussed, “anti-asset allocation” is typically the result. He discussed it in relation to investor money chasing gold and silver exchange-traded funds (ETFs) following the price surge.
“We have been advising anything to do with asset allocation over the last two years since markets become pricey,” Naren stated. “We have been suggesting the following categories: aggressive hybrid, balanced advantage, multi-asset, equity savings, and hybrid funds.”
“We are now recommending maybe avoid multi-asset if you believe that gold and silver have been too exuberant,” he continued.
“Whether markets have moved sideways, down, or up, it usually will not impact any investor’s risk appetite or long-term goals,” stated Rajeev Thakkar, chief investment officer and director of PPFAS Mutual Fund. The majority of money can go toward growing asset classes like stocks if a person is 25 years of age or younger, has a steady income source, has a long history of investing for themselves, and has risk insurance in place.
A portfolio with a high proportion of fixed income is appropriate for a retiree who is reliant on cash flows. Therefore, it makes no difference if we are talking about it now, three years from now, or six years from now. Thakkar suggested that the best course of action for individuals who are new to the market or who are unable to handle volatility is to enter through hybrids and “gradually progress up the curve.”
“If someone is not sensitive to volatility, start with a cautious hybrid fund or a 50:50 kind of balanced allocation between equities and debt; and gradually increase the risk percentage because we do live in unpredictable times today,” Thakkar continued.
“For first-time investors, hybrids do make sense. According to their risk tolerance, new investors can choose from a variety of options, including aggressive hybrids and equity savings,” stated Neelesh Surana, CIO of Mirae Asset Investment Managers (India).
Regarding stocks
According to financial analysts, investors should lower their expectations for stocks. For some reason, 15% automatically comes to mind whenever someone discusses equity returns. That expectation stems from a time in the mid-1990s when government bonds yielded around 14%, PPF rates were around 12%, and inflation was close to double digits, according to Thakkar.
“Now that we know the inflation and interest rate figures, you can not expect similar kinds of nominal returns in the future. Theoretically, even if index-level equities returns are low double-digit or high single-digit, they will still outperform bonds, but end users or even financial planners are not factoring that in for some reason.
We are currently in a moderate return phase. However, there may come a period when markets shift and you have a higher return phase as well. In the years 2017–2018, we also believed in a mild return period.
Our perspective shifted once COVID struck and the markets shifted. According to Naren of ICICI Prudential, “we genuinely believed that a larger return phase. Therefore, we may have a moderate return phase today.” However, if the markets have a significant correction. We can shift the perspective from one of a moderate return to one of a higher return. So, beginning now, if you ask me. The answer is no, however we can shift our perspective from one of a modest return to one of a greater return phase if the markets make a significant correction.
Therefore, if you were to ask me if I believe in a higher return phase today, I would say that we do not, but if you were to ask me if I thought that we might have a higher return phase in the future, I would say that it is feasible.
Thakkar concurred that initial values are important. He stated, “You can have valuation re-ratings together with earnings growth if starting valuations are inexpensive, and that can add to the growth.”
“Valuations are not extremely cheap, but they are fairly appealing. All things considered, we will have respectable returns, but I will still place it in the 12–14% range over a five–ten year timeframe, which is still very stable,” stated Surana of Mirae Asset.
“You should put away anything you will not need for the next three to five years in an asset class that compounds well, like equities funds, which have done so in the past and should continue to do so. And there are different cohorts within that.
In order to obtain representation across industries and enterprises, it makes a lot of sense to obtain large, mid, or multicap funds, according to Surana. Therefore, a sizable portion of any investable surplus that you will not need for the next three to five years should go toward stocks.
It is, nevertheless, clearly directed by the person. We can not give everyone the same response. The investor’s starting point, asset allocation goal, and level of discipline and consistency in upholding that asset allocation all play a role.
ETFs for gold and silver
Exchange-traded funds (ETFs) for gold and silver seem to be attracting investor capital more recently for returns than for asset allocation.
Naren claims that this pattern demonstrated how many investors are still practicing “anti-asset allocation.”
He specifically mentioned the hazards associated with silver as an asset class at this time. Silver is a highly speculative asset. According to our January analysis, silver might rise or fall by 10% on any one day. It lacks dividend yield, price-to-book, price-to-earnings, and cash flow, much like a small-cap stock.
He sounded cautious but claimed gold is a less speculative asset class. Because central banks have enormous gold holdings, it is comparable to a widely owned mega-cap stock. As a result, it is not likely to rise 10% one day and then drop 10% the next. Additionally, people would still turn to gold if they lost faith in the dollar. However, following such a strong rally, gold investors must also exercise caution.
