Chasing glamour can be dangerous and never more so for vulnerable middle class households playing the stock markets. Ask Radhika Gupta, CEO of Edelweiss Asset Management, on what middle class investors should be focusing on and her advice is simple: Stop chasing glamour. Pick safe, steady, dal chawal instruments.
Gupta made the observations during a conversation with Prabhu Chawla, Editorial Director, The New Indian Express, and author and senior journalist Kaveree Bamzai on TNIE’s Expressions, a series of live web casts with people who matter.
“I think the middle class needs to stop chasing glamour. I think they need to chase simple dal chawal-type investments. 80 per cent of your portfolio needs to be these dal chawal investments,” Gupta said.
According to the asset manager, the average middle class investor needs two things: One simple mutual fund product that invests in the top 200 companies in India, which they should hold for seven to ten years.
And the rest of their portfolio, may be in safe instruments like fixed deposits and the Bharat Bond ETF.
“The returns you make in investments,” Gupta observed, “do not come from the products. It is in the behaviour (and discipline)… If you do the same every month, and don’t chase what your neighbour or friend are doing, you will make money. And, it will stick through the good and bad”.
Gupta also stressed the need for investors to organise their investments in three broad baskets: Long-term investments like equity MFs, a more flexible corpus where more risk can be taken, and an easily liquidisable contingency fund.
“A lot of people, I have discovered during this crisis, do not have this contingency fund. Once you don’t have one, you get stressed,” she said.
As for whether borrowers should opt for the moratorium, Gupta said that it is not a costless exercise. “My simple advice is: if you can pay the loan, please pay it on time. Because, otherwise you will pay more in interest. This is just a cashflow management option for people who genuinely cannot pay”.
Speaking on the larger economy, Gupta pointed out that the government has to find a way to put money into the hands of the people in order to spur demand. “There is liquidity, but it's not being passed on to the right people. Banks are flush with money… but that is not being passed on..,” she noted. Gupta noted that many countries like the US have transferred cash directly to citizens.
“The constraints in India are different. But, ultimately you have to put money in people’s hands so that they start spending,” she pointed out.
However, Gupta also noted that there are a few green shoots the economy can look towards. First, with the RBI slashing interest rates by record levels, it will be cheaper for companies to borrow.
“Secondly, oil prices have come down substantially and that is usually a very good thing for India,” she noted.
Going forward, the pandemic may well open up new promising sectors for entrepreneurs, including any disruptive businesses in the technology space, such as video conferencing platform Zoom, content creators or contact-less tech companies.