Balanced advantage funds or equity savings manage asset allocation dynamically and are suitable for investors seeking smoother participation without making timing calls. Kalpen Parekh, MD & CEO, DSP Mutual Fund, tells Saikat Neogi that conservative investors should start with large-cap funds and add to flexi-cap funds on corrections.
What investment strategy would you suggest for retail investors now?
All segments of the market have some opportunities as well as risks. Personally, I prefer a flexi-cap fund for life which will choose a good mix of good companies and good valuations and across companies in India and the world. This approach allows freedom to do what is right without being slotted in one category and there is better tax efficiency when the fund rebalances exposures, while the investor remains invested forever. If you are a very conservative investor, you could start with large-cap funds and add to flexi-cap funds on corrections.
For retail investors willing to invest lump sum, would hybrid strategies be a better bet now?
When markets have rallied meaningfully, lumpsum investing can create anxiety around timing. Balanced advantage or equity savings funds help investors participate in equities while cushioning volatility through fixed income exposure. These strategies manage asset allocation dynamically and are suitable for investors seeking smoother participation without making timing calls. Over time, the key remains discipline, staying invested through market cycles rather than attempting to time entries and exits.
How should investors look at allocation to gold and silver as a portfolio diversifier?
Gold and silver can act as effective diversifiers, particularly during phases of currency volatility or geopolitical uncertainty. A small, strategic allocation can enhance resilience. View them not as trading instruments, but as long-term portfolio components that preserve purchasing power and offer stability when other assets correct. It would be risky to over-invest just because they have risen by 30-50% in the last one year. Long-term returns of precious metals are 10-11%. They are as volatile as equities and do fall by 20- 50% or remain sideways for many years. Yet, in emerging markets including India over time they have earned closer to equity returns but more so when stocks don’t do well. So they act as accelerators when stocks act like brakes and vice versa and thus smoothen the return path. Hence, have a portfolio approach and keep 10-15% but don’t over-invest.
Why are investors favouring arbitrage funds?
Investors are not choosing arbitrage over equity funds. Both are different customer sets. Retail and individual investors continue to invest in equity and multi-asset funds. Treasuries and large family offices are investing their short term money in an arbitrage fund because these funds have similar returns and risks like debt funds and slightly better tax efficiency.
How will DSP MF’s campaign ‘No More’ caution investors on impulsive investing?
The ‘No More’ campaign is an attempt to create long-term disciplined investors as compared to just acquiring temporary customers. Human beings are designed for bad investing. Behaviour like chasing past high returns, choosing funds without knowing their risks, investing at high NAVs and exiting when NAV falls instead of doing the opposite.