Inside India’s investment paradigm: multi-asset allocation strategies, trends and insights for 2023
India is poised to be a rare bright spot despite a tough macroeconomic environment and a slowing global economy, said key investment strategists and experts from Quantum AMC and wealth management platform Kuvera, as they highlighted how multi-asset allocation strategies will be key to generating sustainable market beating investment returns.Weighing in on the India asset class outlook and the best asset allocation strategies as well as the general macroeconomic trends leading into 2023 were Gaurav Rastogi, founder and chief executive officer (CEO) of wealth management platform Kuvera and Chirag Mehta, chief investment officer (CIO), Quantum AMC, who were speaking to Miloni Bhatt, Editor - Digital Broadcast, EconomicTimes.com.
Rastogi explained how India is finally in a position to exploit one of its key advantages that it has over the advanced economies of the world: its demographic dividend characterised by its young population. The push by the Indian government for massive capital and infrastructure expenditure will enable this young population to realise its full potential.
Rastogi pointed out that the long-term view on India is positive with equity markets having a positive outlook and institutional mechanisms geared towards providing the push that its young population needs. Overall, Rastogi said that for the retail investor, the focus should be on having a long-term view and not on timing the markets.
2023: Time to Bet on the winning investment strategy - Multi Asset Funds
The year 2022 reinforced why investors adopt an asset allocation investment strategy, with a diversified portfolio across three or more asset classes. With equities underperforming and debt struggling, gold acted as a good hedge against this backdrop, serving as a stark reminder why a multi-asset allocation strategy is key to navigating and creating value in such markets.To help investors understand the importance of a multi-asset allocation strategy in 2023, we bring together experts for a specially curated session to share their outlook for the market for 2023 and unpack the investment strategy lessons from 2022 that investors should keep in mind in this new year.The Union Budget of 2023-24 highlights India’s massive capital expenditure push, which Mehta said will help put the broader Indian economy in a structurally sound place and help it weather the incoming economic slowdown.
Mehta contended that there is increasing ground-level economic activity, which portends well for equity markets and 2022 proved that gold can be a viable asset class for generating returns and hedging your risks. Mehta reiterated that a multi-asset allocation strategy will be key towards generating optimal returns in an uncertain economic outlook.
Multi-asset allocation strategy
The most important question that retail investors face when it comes to investing is which asset class to put their savings in. As Rastogi pointed out, the choices for retail investors are well-defined: equity instruments like stocks and exchange traded funds; debt instruments like gilt bonds issued by the government, corporate bonds and fixed deposits; real assets like real estate and gold.
Essentially, the need for multi-asset strategies arises because the different asset classes move largely independent of each other. While equity may go up, there might be substantial downswings in the debt market. It is this inherent volatility that calls for multi-asset allocation where downswings in one asset class will be balanced by upswings in another.
For the everyday retail investor, Rastogi advised investments in mutual funds (MFs) and exchange traded funds (ETFs) instead of actively allocating weights to different asset classes and creating your own asset allocation strategies. Rastogi also pointed out that investment portfolios with multi-asset allocation strategies make the investor remain invested longer and get the advantages that compounding offers over a longer investment horizon.
Mehta concurred, saying that although retail investors can be disciplined and sophisticated to manage their own portfolio with multiple assets, for most retail players it is safer to invest in a MF or an ETF backed by seasoned fund managers, who know modern asset allocation strategies taking advantage of the current economic cycle.
Behavioural Trends
There have been some interesting trends when it comes to investing among retail investors. Rastogi pointed out that retail participation among women is going up and 30 percent of customers of the wealth management platform, Kuvera, are women. Although the general retail investors are risk-averse, the real problem according to Rastogi is that investor behaviour is very hard to change; even when investors are provided with information detailing their risk tolerance, life stage and goals, most investors stick to the asset class they feel comfortable with.
Rastogi also elaborated how having a multi-asset allocation strategy will significantly lower your tax burden. For all practical purposes, multi-asset funds can all but guarantee lower taxes, which result in healthier returns.
However, the Indian investor is waking up to the advantages of multi-asset allocation strategies when it comes to hedging risks and surviving crippling economic shocks, which often wipe out a particular asset class.
As Mehta pointed out, although the popularity of multi-asset allocation strategies are increasing, massive amounts of money are still invested in FDs whose returns, when adjusted for inflation and taxes, are a losing proposition. Thus, the scope for multi-assets funds is huge.
Overall, both summed up why it maybe time for the Indian investor to reorient their outlook towards multi-asset allocation strategy and move beyond the conventional investment paradigm.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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( Originally published on Feb 28, 2023 )In Video: 2023: Time to Bet on the winning investment strategy - Multi Asset Funds (This article is generated and published by ET Spotlight team. You can get in touch with them on [email protected])
This story originally appeared on: India Times - Author:Faqs of Insurances
