Who doesn't want to make money? However, making money is not everyone\u2019s cup of tea. Sadly, most people make the classic mistake of investing at the top and redeeming at the bottom, when the opposite should be done, says Manish Mehta, Head-Sales and Marketing, Kotak Mahindra Asset Management Company. In an exclusive interview with Sanjeev Sinha, Mr Mehta shares his views on diverse investment avenues, ranging from mutual funds to small savings schemes, and also gives tips on the right way of investing in the stock markets, among others. Excerpts: Why should one invest in mutual funds? Mutual funds have emerged as a popular investment vehicle for investors over the last couple of years. Historically mutual funds have generated returns which have outperformed other asset classes like gold, fixed deposits and real estate. For an investment as low as Rs 500, one can own a share in a diversified portfolio of companies that represent our economy. The portfolio is managed by professionals whose full-time job is to monitor fund performance, track companies being invested in and take decisions which are prudent for the portfolio. Liquidity is easily available on a daily basis and transactions are easy to execute. Summing it up, mutual funds offer an investor diversification, professional management, liquidity, and ease of transaction. Mutual fund investment is becoming popular, and small savings schemes like PPF, NSC are losing sheen, as per the latest RBI data. What's your view on this? We have witnessed small savings rates of PPF, NSC moving southwards in the past few years. If one accounts for inflation, then the returns would be very low. Mutual funds have been generating better inflation-adjusted returns for a similar period of time. Whatever be the case, do you think it is time to shun small savings schemes? Will it be good for investors? One needs to follow a disciplined asset allocation model. Factoring in the age and risk profile, one needs to diversify amongst equity, fixed income. Within fixed income, there are options of small savings schemes, fixed income mutual fund schemes. One needs to ascertain the most tax-efficient option for allocating investments. Besides, tax efficiency, liquidity could also be a critical feature which an investor may want. Given the flexibility mutual funds offer, the popularity of small savings schemes seems to be diminishing. Keeping the current market scenario in view, what should be an ideal investment portfolio for the common man to retire comfortably? As mentioned earlier, one needs to ascertain his \/ her asset allocation keeping in mind one's individual risk profile. The general thumb rule is 100 minus one\u2019s age should be the percentage of equity allocation. Once that\u2019s decided, allocating investments between equity, fixed income and, more importantly, sticking to the asset allocation is key. Enough data is available on benefits of investing through SIP \/ STP. They inculcate a disciplined approach to investing and smoothing the volatility due to regular investments. Making good money in stock markets is everyone's dream, but very few people emerge a winner. Is it because of the unpredictable nature of the market or one's investment style? Who wouldn\u2019t like making money? However, it is not everyone\u2019s cup of tea. Money has been made in all kinds of market, but patience and conviction is important. Most people make the classic mistake of investing at the top and redeeming at the bottom, when the opposite should be done. There are studies which have shown variance in the market return and investor return because most investors may have not waited out the entire period of investments. So, it is extremely important to have a plan, set your goals, both short and long term, allocate as per your asset allocation and patiently watch it play out. An investor can never control the market, but can surely control his\/her emotions. What is the right way of investing in the stock markets? Can you share some secret formula? We come across all kinds of investors, some who fancy investing in direct stocks. It suits those who understand the markets, have appetite for risks. If you are of that variety, then so be it. If not, leave it to the professionals who provide you an elaborate bouquet of investment schemes across asset classes with transparency and liquidity. What is your advice to investors, particularly those who are risk-averse? Fixed deposits have been one of the safer options for investors. With rising inflation, they have been losing their sheen. Other traditional investments like gold, real estate have challenges of liquidity, time correction. If you are a conservative investor, do consider investing in fixed income mutual funds which would offer better tax-free returns. A moderate investor can look at hybrid products like equity savings fund which is a blend of arbitrage, equity and fixed income or an equity hybrid scheme which invests between equity and fixed income.