Your First Investment
Kalpen Parekh: It was in 1998. My first salary went into a mutual fund. Thanks to my role, which involved identifying the right schemes, I started learning about funds from day one of my career.
My senior from college who worked in a mutual fund played an important role in exposing me to the category. My first investment was in a debt fund and a systematic investment plan (SIP) of an equity fund.
Neil Parag Parikh: I was fortunate that my family started investing in equities on my behalf when I was six. I made my first investment when I started my career in 2004. I bought three stocks by investing ₹25,000 in each using dividend from investments made by my family on my behalf.
Nikhil Kamath: I started investing when I was 17. I am 36 today. I bought a penny stock. I was working at a call centre then and many people there used to trade. Zerodha started when I was 23.
Radhika Gupta: I started investing at 24, after a year or two of starting earning, which probably sounds late. I was working in U.S. then, so I used to invest in U.S. mutual funds via 401K plan, in U.S. 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.
Your Current Portfolio
Kalpen Parekh: My investment approach is simple. I ensure I stay invested for the longest period. Because when asset classes grow, time is the lever for wealth creation. My portfolio is diversified but concentrated only in mutual funds. Mutual funds are transparent, well-regulated, cost/tax efficient and provide liquidity. There is perhaps no other product that can provide all these benefits. I don't invest in next-gen assets. Good investment rules are old fashioned. I ask, can I lose money in the long term? If the answer is yes or I don't understand, I don't invest. High costs and taxes are enemies of long-term compounding. This makes my investing choices basic and boring.
Neil Parag Parikh: I do not invest in products I don't understand. I have no investment in next-gen assets.
Nikhil Kamath: I like to be diversified. In equities, I invest in direct stocks, as I do this full time. I have had a lot of banking exposure of late. I have invested in blue-chip companies, the ones you find in Nifty50. I want to add more companies which benefit from production-linked incentive schemes. So, I am looking at semi-conductor and manufacturing companies. I have had Reliance in my portfolio ever since I started trading. I like fixed income a lot. At 7.5%, risk-free, it is very attractive. Traditionally, Nifty has given 10-11% a year, with a lot of risk. I wouldn't be unhappy to have more fixed income in my portfolio. If I make 12-13% a year from this portfolio, I will be quite happy. If you can compound at 12%, your asset base multiplies every six years. So, if I start at ₹100, in six years, I will have ₹200. I am happy with such returns.
I like commodities a lot — oil, silver, gold, platinum. We are seeing the beginning of a long inflationary cycle and commodities traditionally do well when there is high inflation. From that perspective, I like metal companies.
I have never bought a crypto or an NFT. I don't think I will do it in future as well. I have exposure to alternative asset classes like private equity and unlisted companies, but that would be less than 5% of my portfolio. I have never figured out how to research an alternative asset class. There are no parameters to fundamentally analyse them. If I am looking at Infosys, I am looking at what my share will earn next year and at what rate are those earnings going up. The same does not exist in crypto.
Our current portfolio is a function of the fact that we are slightly conservative investors as both of us, me and my husband, work in capital markets, a high-risk profession. The core of our portfolio is funds that are similar to balanced advantage funds. This accounts for 60-65% of the portfolio. Then we have SIPs in two mid- and small-cap funds. We also have some SIPs in international funds.
For our son, we have just started building his portfolio. For kids, start as early as possible. As they have time, they will enjoy the benefit of compounding. Secondly, when they grow up, I would want to them to understand the value of money and importance of saving and investing habits. Once they have their own portfolio, it will be interesting for them to track it. You may start a simple SIP in an equity index fund for your child.
I don't have a large allocation to gold and silver. But it is not a bad idea to have up to 5% allocation to these metals. In this inflationary period, if you are a conservative investor, these can be a part of your portfolio.
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 small exposure to AIFs. We are launching a private equity and growth equity fund in AIF category and I will probably have some exposure in one or two unlisted companies through that. I am looking to grow that exposure over time.
Your Health and Life Insurance
Kalpen Parekh: Before investing, take health and life insurance cover at the right cost structure. My mother worked for an insurance company and took care of insurance needs. I have followed those rules.
Any break in good health is a huge cost and hence it's important to have meaningful health insurance. Likewise, most Indians don't have complete financial security, so having a life cover is again critical till you don't have an appropriate corpus for the future.
Neil Parag Parikh: I do not have life insurance as my investments should be sufficient for my family if I am not around. If I did, I would go only for term insurance. I don't believe it's a good idea to bundle insurance and investments. I believe health insurance is crucial. A comprehensive (within and outside India) policy with full coverage/features from a company with wide network of hospitals and ease of claim settlement are important for me. I am less sensitive to premium costs as long as the policy provides me peace of mind that I and my family are adequately covered.
Nikhil Kamath: Health insurance cover is whatever my office provides for everybody. In life, people should have one policy, whose only purpose is insurance. I don't think one should buy an insurance product moonlighting as an investment product and vice versa. I have one life and one health insurance.
Radhika Gupta: Life and health insurance are provided by my employer but I have been debating on increasing the health cover we have as a family. I have had a mixed experience with health insurance. I haven't found them great so far. But we should either increase health insurance or build a corpus that can meet medical needs.
I went through maternity recently. The experience that most health insurers provide leaves a little to be desired. I have never got cashless treatment. There are too many conditions. The process is not very comfortable or easy.
Advice to New Investors
Kalpen Parekh: Learn from Warren Buffett, the richest investor. He started investing at 11 and said I repent I started 11 years late. He knew that the most powerful force to multiply savings is time given to good businesses. So, invest for long term. This means don't stay out, start early, learn about asset classes. Don't ask what returns will I get. Instead, ask, when things don't work, how much can I lose? This will make you a safer investor and help you grow your money over time. Most of us find this difficult or boring and end up taking wrong decisions. Find a good advisor who can make you a good investor.
Neil Parag Parikh: Mutual funds are the best vehicles for all investors. The mutual fund industry is well-regulated, transparent in communication, provides ease of transacting, is tax efficient and has low costs. New investors should first get a financial plan made with asset allocation as per their risk profile and goals. For equity allocation, I would suggest investing via a SIP in a diversified equity fund (flexicap or ELSS) and a large-cap index fund. These would take care of most investors' needs. Investing is supposed to be boring, so stick to basics such as following asset allocation and financial plan, continuing SIPs and letting wealth compound by having a long-term approach. Investing is a marathon, not a sprint.
Nikhil Kamath: Keep things simple. The complicated often looks more attractive.
Radhika Gupta: It's always good to get started. Don't worry about timing the markets. It is important to be informed. Take it slowly 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 and not because of FOMO or what works for anyone else.
Your Retirement Planning
Kalpen Parekh: I don't invest consciously for a goal. Coming from a family of middle-class high savers, I have a habit of saving and using mutual funds as a vehicle for savings. Having done this for 24 years now, I have achieved most goals. I invest almost every rupee of my savings via mutual funds across categories such as equities, debt, international, commodities and precious metals.
Apart from that, some money is deducted from salary for provident fund and pension fund. I have some investments in sovereign gold bonds. Almost 95% of my savings are in equity and debt mutual funds.
Neil Parag Parikh: I invest in equities for any goal which is more than five years away. Thus, for my retirement, my investments are heavily skewed towards equities, mainly equity mutual funds.
Radhika Gupta: I haven't started thinking of retirement although retirement planning should be started as soon as one starts earning. My husband and I are focused on building a corpus. We do regular SIPs in equity mutual funds, balanced funds and international funds. We have been doing these SIPs for a long time and have slowly built a meaningful corpus. We use the corpus. We recently bought a house from the same.
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