MF Masters | Asset allocation simplified for first-time investors
The only way to take advantage of what the funds are able to generate is to stick by them for a long period, says Axis Mutual Fund MD Chandresh Nigam
Axis Mutual Fund became one of the leading Asset Management Companies in terms of asset under management (AUM) volume. For this success, Axis Mutual Fund MD Chandresh Nigam gives credit to their differentiated approach since inception.
He said, “We always thought that whatever we do has to be aligned with investor’s interest from long term perspective. It is about institutionalization, investing in sustainable strategies, ensuring quality in your portfolio as that is the surest way to cut down risk in the markets and most importantly, proper risk management.”
According to Nigam, this kind of approach has given much better outcomes to investors. From an equity portfolio construct point of view, the advice for first-time investors is that understanding one’s risk profile is very important. Apart from this, one must also know the amount of money one can invest in the markets.
‘First-time investors should look at large-cap diversified funds as they possess minimum risks. It has the power to sustain all the downtick. Build up your asset allocation over a period of time. Once you get more accustomed to investing, then you can look at other focussed asset classes. Diversification reduces risks and one can also diversify with international funds,’ Nigam asserted.
On the duration of investment
Analysis by Axis Mutual Funds suggests that over the last 10-15 years, investor returns lag fund returns by 5-6%. That compounded over a 10 year period means that investors are probably getting only a half of the total performance.
Nigam suggested, “The only way to take advantage of what the funds are able to generate is to stick by them for a long period.”
Talking about the inflow trends in equity funds, he said that negative flows in equity funds were observed post the first wave of Covid-19. This was for two reasons. One, many investors wanted their money back due to the fund crunch. Second, while the SIP business largely continued, the lumpsum business stopped. “November-December onwards we started to see some change in trends as SIP and lumpsum investments started to grow,” he said.
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