Smart investing is about diversifying your portfolio and not about putting all your eggs in one basket. It is about making informed decisions so that when one asset class loses steam, you quickly reposition yourself and reap the benefits of another asset class to stay ahead of the curve. To help you invest systematically and spend smartly, we speak with three market experts—Nikhil Kamath, Co-founder of Zerodha, and Co-founder of True Beacon; Nilesh Shah, MD, Kotak Mahindra Asset Management Company; and Radhika Gupta, MD & CEO, Edelweiss Asset Management—to understand how they save, invest and spend their money. The experts also share the strategies that are likely to play out in the future and the opportunities that
Q: How do you invest, spend, and save currently?
Nikhil Kamath: I re-invest as much as 98 to 99 per cent of what I earn; a small portion of 1 per cent or under is spent while the rest is saved.
Nilesh Shah: Traditionally people believe in income minus expenses equal to savings. For some time, I have believed that income minus savings should be equal to expenses. Savings for me is not optional, it is compulsory. I spend money to live life in a comfortable manner, but never beyond my means. I earmark a part of my income for charitable activities. To me that is the most important investment. I practice what I preach to people. I do regular investments, I do long-term investments, and I invest across the asset classes of debt, equity, real estate and precious metals.
Radhika Gupta: The smart money decision I made was spending conservatively and saving and investing as soon as I started earning. I started investing at 24, after a year or two of starting to earn. I was working in the US then, so I used to invest in US mutual funds, equity mutual funds and international equity funds. My portfolio was largely equities. I started investing in Indian mutual funds shortly after I moved back here in 2009. I was 26, and while I had little experience managing money, I was clear about building a corpus. The corpus gave me the ability to move back from the US to India and start my own business without family backing, and with the confidence that I could ride out two to three years without a substantial income.
I am consistent with my equity holdings. My debt allocation has reduced in the overall portfolio from 35 per cent to 20 per cent at present. I have SIPs in some international funds as well. I don’t have a large allocation in gold and silver. Currently, I don’t do fixed income, and my debt portion is taken care of by my hybrid funds.
Q: How do you plan to invest, spend and save in the next decade?
NK: I believe that the asset classes are overpriced today. So, my exposure to gold and fixed income is high, and together they make up as much as 65 per cent of the portfolio. The idea is to wait for some reckoning/correction to come about, during which I hope to increase my equity allocation in the following years. I’m still a big proponent of equity investing, and it is as low as it is today because of the current valuations.
NS: My principals on savings, investment and spending aren’t going to change in the next decade. I will still be frugal with spending and yet live comfortably. I will earmark a portion of my income for savings as well as charitable activities. I will invest 10 years down the line on the same principle as today, of long-term, regular and disciplined investments.
RG: As I mentioned earlier, I don’t have a large allocation to metals but it is not a bad idea to allocate up to 5 per cent in these metals. I will think about adding the yellow metal to my portfolio, considering it has given better returns than the rising inflation and we have a fund called Edelweiss Gold and Silver ETF in the pipeline. I have a small exposure to AIFs. We are launching a private equity and growth equity fund in the AIF category, and I will probably have some exposure in one or two unlisted companies through that, and I am looking to grow that exposure over time. There will be no significant changes in the equity segment.
Q: How is your portfolio mix currently? How do you see it changing in the next 10 years?
NK: It’s a combination of equity, fixed income, debt, gold and real estate, in that order. Equity is about 40 per cent; debt is 45 per cent; gold is 10 per cent; and real estate and alternatives constitute the remaining 5 per cent. With time, as valuations become less expensive, I would look to increase my equity exposure; having a higher equity allocation makes sense given the tax advantage, power of compounding, etc.
NS: My portfolio mix is tilted towards equity. I do have exposure across debt, equity, real estate and precious metals. As I grow old, my portfolio will transit from equity tilt to having a debt tilt.
RG: We are slightly conservative investors as both my husband and I work in the capital markets, which is a high-risk profession. I am largely consistent with my equity holding, which I have been maintaining in the 65-70 per cent range since 2020. I have regular SIPs in equity mutual funds (two mid- and small-cap funds), balanced funds, and international funds in both developed and emerging markets as a part of diversification. We have just started building the portfolio for our son. I don’t have a large allocation in gold and silver. I don’t do fixed income as I have a home loan, and with current rates, it’s better to pay off the loan than invest. My debt portion is taken care of by my hybrid funds. I have a small exposure to AIFs that I am looking to grow over time with a private equity and growth equity fund in the AIF category that we are launching in the coming years.
Q: What are some of the money mistakes you have made?
NK: Planning and investing for the short-term while not paying heed to how macro headwinds change, and not acting fast enough. Many times, you feel like you should change a certain thing in your portfolio but don’t act on that instinct quickly enough.
NS: I have made many mistakes. God was kind enough that my errors didn’t cost me a lot. I relied upon “tips” to make a quick buck. I invested to make money overnight in things that I didn’t understand. I tried my hands at trading to make money. I bought on momentum rather than fundamentals. I have made all the errors there are, only to become wiser. I wish someone had told me that it is better to learn from others’ mistakes than from your own.
RG: My biggest money mistake was not paying attention to asset allocation. When I started earning, there was an impatience to invest entirely in equities as everyone else was doing the same and times were good. I didn’t pay attention to my own risk profile. One more strategy that hasn’t worked for me in the past year is international allocation. I am holding global stocks, especially in emerging markets, as part of the equity segment, which has trailed India’s returns over the last year, but I continue to hold it as part of the asset allocation. Starting is usually a smart idea. Don’t stress about market timing. Take it slow so that you can make mistakes that are small and then discover what works best for you. And invest the way that works for you, not the way that others invest or out of FOMO (fear of missing out).
Q: What are some themes to watch out for in the next 10 years?
NK: Energy transition. We are moving towards more efficient sources of energy. Everything from green hydrogen to renewables and geo-engineering and climate tech will be quite large as a space in the next 10 years, with many large companies forming in the sector.
NS: India is a rising tide. The rising tide lifts all the boats except the one that has a hole in it. The same is true for the equity markets in India; all the companies will do well except the ones that have governance issues. As long as you invest on a regular basis, invest for the long-term and invest in good managers, you will do well.
RG: Our view has always been asset allocation-focussed. Rising yields offer one opportunity to lock in money at higher rates for the long term. So, long-term-oriented target maturity funds in today’s regime might be a very good option, especially for people who want to lock in for 10-15 years—maybe domestically driven themes rather than export oriented or companies with strong global business. The focus will be on cyclicals that benefit from the revival of the domestic economy, and the beneficiaries of schemes like PLIs. The whole manufacturing movement will also be in focus.
@teena_kaushal
