A Balasubramanian: …The bigger challenge for every investor is actually investing in the equity market or creating a portfolio that could help in creating longer-term wealth. Most of the time, the question that comes in the minds of people is how do I go about creating a core portfolio.
Core portfolio is something essential in everyone’s portfolio to create longer-term wealth. You end up having a confusion in terms of the variety of mutual fund schemes out there. There are many categories there–which categories should form part of my core portfolio, should become a part of my permanent portfolio, and which part of the mutual fund multiple schemes can be considered over and above that, that’s always a question mark.
As per our own analysis, the research undertaken, the large component of the core portfolio is like any money manager constructs a portfolio.
As a money manager,… I will design a portfolio strategy into two parts: one is the core portfolio and the second is the satellite portfolio. Satellite portfolio is something which I will use for differentiating my portfolio return and core is something I likely buy for longer, buy and hold and keep it for long-term wealth creation.
Assuming that you draw a parallel of the same thing, same portfolio construction concept, but from an individual investor’s point of view or HNI point of view, they have to apply the same principle. Investment does not change from person to person…
We must look at pro investing as a principle, given the fact that we have been doing educational initiatives across different topics like SIP, STP, or investing in equity, investing in debt and within that category of equity investing…
Every investor who has money first has to get onboarded in Balanced Advantage Fund. An investor has not been trying out much of equity, at the same time he wants to have the flavour of equity, at the same time he is coming for the longer term. The money manager will take the call of going in and out, depending upon what the market outlook is, in terms of allocating equity or reducing equity and so on and so forth. That’s why first and foremost comes the Balanced Advantage Fund.
Then comes investing in bluechip, large cap, frontline companies that have established track record… That could potentially become the second large component of our portfolio allocation.
…Sometimes we do get confused between which market cap company I should make an investment in. Sometimes we believe that mid cap could potentially run and therefore I should have mid cap, or large cap would do very well, and so I should have large cap. That’s something you are not going to find an answer as a common investor. That’s why leave the choice with money managers such as a flexi-cap fund. The money manager uses his own reset capability, macro understanding that he has. At the same time, he also sees where the big money can be made vis-a-vis one segment of the market or market cap, on basis which he allocates money…
Sometime he is skewed towards large caps, sometimes towards mid-caps or small caps to generate optimal return over a period of time. We need to look at each of the concepts from a risk category point of view.
…Balance Advantage Fund, then comes the large-cap funds, and third is flexicap. This, we believe, should form part of the core portfolio of investors, whether they make lump sum investment, or SIP investment, or STP investment by putting money in liquid funds or the debt funds…
Whichever way you actually make the investment choices, end of the day, for anyone to generate longer-term wealth and longer-term fulfilment of your dream, for which they have to make investment in equity…
Within equity as a category, these different types of schemes should form part of the core portfolio construction of the investors. That’s why we came with a concept called pro investment.
Education at the broader level can’t be done, unless we address specific issues that investors have in their mind and help them take informed decisions by creating a deeper understanding of how the portfolio has to be constructed… Pro investing as a concept and educating the investor came with this background.