In the wake of a Rs 2,200 crore trading scam uncovered in Assam, Edelweiss Mutual Fund CEO Radhika Gupta had advised investors to stick to simple, steady investments rather than chasing quick profits. Her advice focuses on the importance of a balanced, diversified portfolio in navigating the complexities of the stock market. She believes it causes ‘no indigestion’.
What Was The Assam Scam?
The Assam scam involved two people, Vishal Phukan, and Swapnil Das, who tricked investors with promises of 30% returns in just 60 days through fake online stock market schemes. This massive fraud serves as a stark reminder of the risks associated with get-rich-quick schemes and the importance of due diligence when investing.
Gupta's Advice: Stick to 'Dal-Chawal' Funds
Radhika Gupta's advice centers around the concept of 'Dal-Chawal' funds, which she describes as broad-based mutual funds that are "all-weather" and "span a range of sectors." These funds, she suggests, should make up approximately 80% of an investor's portfolio.
Gupta points to balanced advantage, aggressive hybrid, flexi, multi, large, mid, and broad-based 250-500 index funds as examples of "forever funds" that can provide steady returns across different market cycles. She also noted that the choice between active or passive management is less important than avoiding narrow, theme-based funds that may perform well in one cycle but struggle in the next.
The Benefits of This Diversification
Investing in broad-based funds helps investors stay secure through different market cycles by avoiding putting too much money in just one or two sectors that could be struggling. A diversified investment portfolio ensures that if one investment drops, others can balance it out, giving investors a better chance of staying steady through both gains and losses.
Gupta also highlights the importance of sector rotation, stating that sector funds are often the "flavour of the season" but rarely outperform the market consistently. She points out that predicting down cycles in sector funds can be tricky and sometimes goes against expectations, as seen with the surprising underperformance of banks when interest rates rose and the unexpected resilience of tech during the COVID recession.
Avoiding Aggressive Sector Shifts
Flexicap and multicap funds, Gupta suggests, are better equipped to avoid aggressive sector shifts for this reason. By maintaining a balanced approach, these funds can provide more stable returns over the long term.
Conclusion
In a world where get-rich-quick schemes and sector-specific funds may seem tempting, Radhika Gupta's advice to stick to 'Dal-Chawal' investing is a timely reminder of the virtues of patience, diversification, and a balanced approach to investing. By focusing on broad-based, all-weather funds and avoiding the lure of quick profits, investors can build a portfolio that is more likely to withstand the ups and downs of the market and provide steady returns over the long run.
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