CCIM 21 came to an end today. Day 3 witnessed the same zeal and enthusiasm as large number of participants continued to be a part of the three-day learning journey.
7 distinguished speakers shared the stage and helped attendees with some simple and actionable advice. Every speaker gave the much-needed clarity on making the most of existing opportunities while safeguarding against uncertainties.
Here are the key highlights of the final day.
Ashutosh Bishnoi, MD & CEO, Mahindra Manulife MF
Topic: Investing outside India
- India is in the emerging market bucket in global asset allocation. The large part of global equity allocation goes to developed markets like the US, Japan and European countries. Why should your investments be restricted to India?
- People whose income comes from external markets or those who are planning children's education in a foreign country should invest in international funds to avoid impact of rupee depreciation
- International investment by Indians through RBI's liberalised remittance scheme is low due to cumbersome processes. MF is the simple route to international investing
- India's real estate price index is falling. In the last 10 years, the total capital return is lower than equity returns. Real estate investments also face liquidity issues
- REIT offers an easy route for real estate investing. Foreign REITs like those in Asia Pacific and the US have performed better than Indian ones
Sandeep Bagla, CEO, Trust MF
Topic: All about Debt funds in 12 min
- The 3 determinants - Liquidity, maturity and credit risk determine debt fund classification
- 2 rules of debt markets - Bond price increases when the interest rate goes down - Longer the maturity more is the sensitivity of the bond price
- Investors looking to create a 6-month/12-month emergency fund can invest an equal proportion in liquid funds and short term funds respectively
- Investors with a time horizon of 3 to 5 years can hold 20% in income funds and diversify their portfolio through funds having a roll down maturity
- Typically, 10-year yield runs 2% higher than the inflation rate. However, in the current scenario owing to supply constraints, the inflation rates are around 5% to 6% and the 10-year yield is around 6.25%. Thus, inflation is expected to come down in future, however in case the inflation rate doesn’t decline, the 10-year yield is expected to rise
Nishant Patnaik, Associate Editor, Cafemutual
Making Money through Mutual Funds
- Indian mythology, i.e Ramayana and Mahabharata have lot of investment lessons to offer
- In Mahabharata, Duryodhan blindly followed Shakuni and that led to his downfall. In the same way, following others can lead to losses for investors. What has worked well for others may not work for you
- Lakshman getting distracted led to the abduction of Sita in Ramayana. This scene holds a lesson for investors. One should not react to market noises and stay true to their commitment
- Like a team of 4-5 warriors was enough to defeat Ravana, a small number of funds are enough to take care of an investor’s every financial goa
- Dronacharya had many students but only the ones who got his full attention became top fighters. This tells us that constant review is important for success in every field including amutual fund investment
- Just like the stability of universe depends on three gods (Brahma, Vishnu and Mahesh), success in mutual funds depends on three factors: diversification, identifying time horizon and figuring out the risk profile
Azeem Ahmad, Head-PMS, LIC MF
Topic: Multi-asset allocation for wealth creation in new financial paradigm
- Markets currently are experiencing K-shaped recovery with some sectors performing well and some others underperforming. A similar trend is expected to continue as some parts of the economy will open up and others may go into a closure depending on the pandemic scenario. Further, the best performing asset class keeps changing. This brings out the importance of multi-asset allocation
- Asset allocation is the key driver of portfolio returns and helps in overcoming timing issues related to each asset class
- Depending on risk appetite 15% to 75% may be allocated in equity (helps generate alpha), 10% to 15% in fixed income (provides safety & accrual), 5% to 25% in gold (provides hedge) and 10% to 20% in cash (provides buffer)
Anish Mathew, CEO & CIO, Sundaram Asset Management Singapore
Topic: International Investing - The Brand Experience
- Indian market has underperformed the US market in the past years and this underperformance came at a higher volatility
- International investing provides access to top cutting edge technology stocks. Out of the top 10 Indian stocks, only 2 are tech stocks and none among them is a cutting edge tech firm. In US, the top 10 list is dominated by tech stocks
- Investing in a big brand delivers higher returns. Because of brand loyalty, they have higher profit to market share ratio
- Global companies have stronger balance sheet as they get revenues from multiple geographies
- Global companies have stronger cash reserves. They are able to use this cash for strategic acquisitions. Such acquisitions strengthen them further
- Concept of brands have worked well in India too. Big brands have significantly outperformed Nifty
- Investing abroad makes sense as big global brands are available at much lower valuation than Indian brands
Prashant Jain, ED and CIO, HDFC MF
Topic: Lessons for investors from the pandemic outbreak
- Risk cannot be foreseen nor can it be avoided but can be dealt with through asset allocation. Asset allocation must be a function of emotional and financial tolerance of volatility. For example, answering the question - What is that portion of wealth that can be spared for a long period on which I can bear volatility? - hints at the amount that can be invested in equity
- Focus on sustainability, strength, comparable advantage of business and business value before entering the equity side
- Most of the returns are made in the 10% days of the total investment horizon. As Warren Buffet says, be fearful when others are greedy, and be greedy when others are fearful, in testing times like the current pandemic, the focus must be on the long term impact and what is the expected value and growth to take place
Prasad Ramani, Founder, Syntoniq
Bias, Behaviors & Blind Spots you need to be aware of
- Investors should be aware of their 3Bs (biases, behaviours and blind spots) when investing
- Why do we behave irrationally? There are three reasons - cognitive limitations, imperfect information and time constraints
- Our brain has two working systems. One is the fast automatic instinctive emotional system and the other is slow effortful deliberate logical system. Most of the problems in our life is due to the gap between the two systems
- Mental shortcuts allow us to make quick decisions but they have a downside too. Making investment decisions in a haste can hurt investments. We could end up holding on to losers and having a concentrated portfolio
- One should adopt key behavioural attitudes like non-deterministic, caution, humility, being actively open minded, among others
- Investors should record and analyse decisions. It helps understand decision making pattern, reframe negative outcomes and over time significantly improves quality of decision
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