50% of my equity portfolio is in NPS: Anil Ghelani

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How did you get introduced to capital markets and when did you start investing in your personal capacity?

Early in my career as a chartered accountant, I tried to understand the various use cases for audited financials and one of them was for analysts and investors to use it for analysing a company before they make investment decisions. That is how I was introduced to capital markets. Later on in my career, I was auditing for many different companies which were in the business of asset management, stock broking, life insurance, etc. This gave me a better understanding of the business and industry dynamics, which then gradually led me to start pursuing a career in the capital markets field as well as making my initial personal investment

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Have you ever invested in direct stocks?

Yes, in the early part of my professional life, I did invest in direct stocks. But very soon I realized that it was not making any sense. More than a principle-based approach, it’s about internal regulatory guidelines. Considering that I work in a highly regulated industry, we at DSP have a mandate not to invest in direct stocks.

My first ever investment when I had just started earning was in a few direct stocks. I’m a chartered accountant and so I thought that I have a good understanding of company balance sheets and I made a couple of investments on that basis . Some of them did well, while in other cases I was chasing trends at the wrong time. For instance, I bought some shares of a company at the peak of the dot-com bubble. After a couple of years when I started working in the MF industry, I realized that MFs are a more suitable approach for me and I stopped direct investments. So, over the last 12 to 15 years, I have not been investing in direct stocks. So, my portfolio does have a few holdings that are legacy investments.

What categories of MFs do you invest in?

I hold some small-cap funds, which are actively managed MFs. Some allocation is in large-cap funds through index funds. I am myself responsible for passive investments and hence, I’m quite convinced about the idea that, in large-caps, the best way to get investment allocation is through passively managed index funds. I also invest in the National Pension System (NPS), through which I get allocation in large-cap funds. About 50% of my equity portfolio is through the NPS.

Some component of my fixed income allocation is also through MFs, primarily in short-term debt funds of 1-3 years duration. I have some cash surplus in arbitrage funds with the aim of near term liquidity.

How much of your portfolio is in passive funds?

If I look at my fresh allocations every month, quite a large portion is in passive funds. As for allocation in the overall portfolio, it is slightly lower because I started investing in passive funds a little bit late. I’d say about 20-25% of my portfolio’s equity component is in passive funds.

When did you start investing through passive funds?

I started investing in passive funds in 2017 when we set up DSP’s passive investments platform. Prior to that, we were aware of exchange-traded funds (ETFs) and index funds and I was actively working in the industry with advocacy and initiatives, etc, in the Amfi committee on ETFs. But we didn’t have our own funds at DSP. About 12 to 15 years back, I had decided to invest primarily in DSP’s mutual funds. So in 2017, when our first index fund, DSP Nifty Equal Weight, was launched, my initial SIP (systematic investment plan) in passive funds started.

Can you share one investment strategy that has worked for you?

My plain and boring investment strategy of sticking to asset allocation and monthly SIPs is something that has worked for me. During the covid-19 market crash and its subsequent sharp recovery, I did not make any structural changes in my investment portfolio. This strategy worked as it has given me superior returns compared to what I would have got by tweaking investments as per market movements and it also gives me peace of mind. The reason for the latter is that though I’m in the business of money management, I’m doing it in a professional capacity. If I have to run investment strategies for my own money, I will have to quit my regular job to fully focus on it. So I stick to asset allocation, review my portfolio periodically as per changing risk and return objectives and age profile and this works well for me.

And one strategy that did not work?

One strategy that miserably failed happened early in my career, around 1999-2000, when I used to invest in direct stocks and it has become a life-long learning. I bought a few stocks in the TMT (Tech, Media & Entertainment, and Telecommunications) sector, which was a hot sector back then, chasing the wrong trend at the peak of the cycle. I held those stocks based on the theory that one should hold investments for the long-term but those levels of valuation never came back. Structurally, you should not have a long-term view without looking at the industry segment or the structural changes. That was a mistake and I decided to not sell those shares ever because it keeps reminding me of a lesson that I learnt. Currently, those shares make up a very small component of my portfolio.

Do you have health and life insurance?

Yes, I have a reasonably large health and life insurance cover. To be honest, during the covid pandemic, it was a sort of late realization for me to have bigger insurance coverage than what I already had. During this time, I topped up insurance covers for myself and a few of my family members.

What is your idea of wealth?

I believe health is the real wealth. Having good health enables you to enjoy whatever capital you have. To talk about money as wealth, having a comfortable lifestyle, to be able to do what you want, when you want and to be able to, in some form or fashion, do something for others, that, for me, would be a good definition of wealth. The rest is just a number on your account statements.

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