Equity investing: Choosing the right approach

Equity allocation in an investor’s overall portfolio has been growing substantially. Several factors contribute to this trend, including good historical returns from few select equities, low yields on traditional investments like fixed deposits and insurance, rising incomes leading to greater savings, and increased awareness through campaigns like “Mutual Fund Sahi Hai.”

The post-COVID stock market boom further fueled investor confidence, as reflected in rising SIP flows, a surge in Demat accounts, and record IPO mobilisation.

As investors progress in their equity investing journey, factors beyond just performance—such as risk management, investment discipline, and professional expertise—become crucial in determining the right approach. Broadly, investors can gain exposure to equities through three primary modes:

1.    Self-managed investing (Direct Equity)
2.    Professionally managed investments (Mutual Funds, PMS, and AIFs)
3.    Hybrid mode (Non-discretionary advisory services)

Each of these approaches has its own merits, depending on an investor’s experience, temperament, and preferences.

Self-Managed Direct Equity Portfolios

This approach is most suitable for experienced investors who enjoy researching companies, sectors, and market trends. It requires an active understanding of factors like stock allocation, sector exposure, liquidity, and regulatory changes.

While this method offers complete control and eliminates professional management fees, it demands significant time, research, and emotional discipline. Investors must avoid impulsive decisions driven by social media, stock market noise, or speculative tips. A lack of thorough research may result in poor stock selection and panic-driven exits during volatile periods.

Discretionary or Professionally Managed Investments

Investors seeking professional expertise can opt for Mutual Funds, Portfolio Management Services (PMS), or Alternative Investment Funds (AIFs). Here, fund managers make investment decisions based on a defined strategy backed by research teams and institutional frameworks.

This approach provides access to a diversified portfolio, sophisticated investment strategies, and SEBI-regulated professional oversight. It is particularly beneficial for investors who lack the time or expertise to actively manage their portfolios. Many funds also offer performance-linked fee structures, aligning the manager’s incentives with investor returns.

Non-Discretionary Advisory Mandates (Advisor-Assisted Investing)

Equity advisory mandates provide a consultative approach for investors seeking SEBI-registered professional guidance while maintaining control. Here, advisors provide stock recommendations and strategic input, but the final investment decision rests with the investor.

This model appeals to investors actively engaged in the markets but seeking expert validation of their ideas. It allows for deeper discussions on investment rationale while benefiting from professional insights without handing over complete control.

Conclusion

Choosing the right investment approach depends on an individual’s expertise, risk appetite, and willingness to stay actively involved in portfolio decisions. Self-managed investing offers control but demands knowledge and discipline. Professional management provides expertise and structure but comes with fees.

Hybrid advisory models bridge the gap, offering personalized guidance while maintaining investor control.
Ultimately, there is no one-size-fits-all strategy—what matters is aligning the approach with financial goals and investment temperament. As equity markets continue to evolve, investors must periodically reassess their strategy to ensure it remains effective in wealth creation.

The author is Senior Managing Partner, ASK Private Wealth

Disclaimer: The information and opinion expressed herein above do not constitute investment advice to buy, sell, or hold any securities, kindly consult the appropriate SEBI registered intermediary before investing-related decisions. The opinions expressed above are the personal views of the author. The views of the author may also differ from the views expressed by any other author of ASK Asset and Wealth Management.