Swarup Mohanty, CEO of Mirae Asset Global Investments (India).
Equity investors have started understanding volatility and are accepting it as an opportunity to create wealth and not only stayed invested, but have also started buying at dips. Swarup Mohanty, CEO of Mirae Asset Global Investments (India), in an interview to Saikat Neogi says this will augur well for them in their wealth creation journey and meeting future goals. Edited excerpts:
In the last one year, there has been a perceptible shift to equity-oriented schemes compared with debt schemes. Why is that happening and how can investors beat the volatility in the markets?
Retail participation has grown in both equity and debt mutual funds. However, since the returns for equity mutual funds have been more attractive, they seem to have attracted the lion’s share of inflows. Also many debt investors have been investing in balanced funds, which is aiding equity inflows. Currently, we are witnessing an interesting period of investor behaviour. Equity investors have started understanding volatility and are accepting it as an opportunity to create wealth and not only stayed invested, but have also started buying at dips. This will augur well for them in their wealth creation journey and meeting future goals. Debt MF investors don’t invest across debt fund categories (like they do in equity), and need to take SIP route to combat the volatility in debt markets. The principles of investing are the same, whether equity or debt.
How should investors look at sectoral funds for higher long-term returns?
We would not recommend investors to look at sector funds, as it is very difficult to time the entry and exit point for such funds. Past history has shown that investor experience has been poor in this category. I believe investors should look at diversified funds, where the fund managers can increase the exposure to the most attractive sectors. We don’t have any sector funds, but we have a thematic fund called Mirae Asset Great Consumer Fund, which is a very broad investment theme and covers many sectors which may be directly or indirectly benefit from consumption theme in India/Asia. This theme will be prevalent for the next decade or so. I think such broad fund strategies are more suitable for investments than individual sector funds.
Would investing in dynamic bond funds make sense in the current interest rate regime?
Absolutely. Expectations are building up that interest rates may go up in near future as inflation hardens and Fed withdraws liquidity from global markets. We need to remember though that the investment strategy here is not dependent on immediate market outlook but focuses on recalibrating portfolio as the market conditions may change. Dynamic bond funds have an investment horizon of at least three years and debt markets may see many different market environments over that period. Our view remains that investors should not worry about timing too much. Like in the equity markets, where investing discipline has proved to be a much greater success factor than market timing, same underlying principles are relevant for debt markets too. In conclusion, investors can invest in dynamic bond funds whenever they have long-term investment surplus.
For long-term benefits, do you think investors should first go for systematic investment plans and then systematic withdrawal plan?
A large section of investors have shifted allocation from other asset classes like gold and real estate. This has been reflective in the subscriptions into SIPs. If the SIP flows are retained, and investor experience is positive, we will see a sea change in investor behaviour towards investing in equities. The key is for investors to is to remain invested in their SIPs irrespective of market movements to gain superior investment experience. We believe SWP is a great way to get regular flows, especially for investors who invest with a goal in mind and want inflows after a certain period. We believe SWP is far superior than monthly dividend options (which may not always work in volatile equity market scenario) for regular inflows. Investments through SIP and withdrawal from SWP is a great combination.
With banks reducing interest rates on savings, does it make sense for people to shift a part of their bank deposits to liquid funds?
I think the question has the answers in itself. Liquid funds offer daily liquidity, high safety and returns much higher than savings deposits on historical basis. That has always been the case but the recent steep drop in savings rate and widening gap with liquid funds will perhaps accentuate the obvious need for this action.
