As investing is a long-term game and diversification is at the core of it, new-age wealth management startups can help individuals to beat market volatility and get good returns by smart diversification of portfolio. Archana Elapavuluri, founder of Pickright Technologies, in an interview with Saikat Neogi, says investors must know where and why they are investing and rebalance, track and monitor their portfolio regularly. Excerpts:

How has fintech helped investors to diversify their investments? How can artificial intelligence help them to construct a smart portfolio?
Personal finance and investment planning is very complex. One needs to be an expert in the investment space or seek an expert for the same. The biggest problem is that both options are not easy. Because of this challenge, people tend to ignore the most important thing in life. Having a platform that can manage, automate and invest in autopilot mode irrespective of the size of the investment will help them to plan and manage better with a single click. Our tech is built to create smart portfolios using user personalisation by learning about users based on past parameters and future behaviour patterns and enabling the user to choose the right eligible investment instruments. Investors can manage and execute all investments across different direct and alternate instruments from one platform.

The record rise in the number of Demat accounts indicates that younger people are diversifying from traditional investments such as fixed deposits and gold to equities. How can they exercise caution given market volatility and the associated risks?
Investing is easy, investing right is not. Caution is needed when young or inexperienced users start investing. Understand that investing is a long-term game and diversification is at the core of it. New-age wealth management startups actually help individuals to beat market volatility and still fetch them good returns by smartly diversifying. Being knowledgeable about where you are investing and why you are investing is very important. Follow rebalancing, tracking, and monitoring of your portfolio. Trading is very different from investing. Never invest in speculations, rumours, and tips. Always invest in companies where there are strong fundamentals. Never panic. For the last 30 years, Sensex moved in the only direction, that is north. And all great companies gave fabulous returns.

While digitalisation has simplified the process of investing because of low entry barriers, why does a trust gap persist when it comes to digital transactions, especially in financial transactions?
We have a traditional mindset, where banks are considered to be the safest place for savings or we invest in gold or real estate. We are touch-and-feel investors. That’s how our DNA is programmed. Now the digital wave in the last 15 years has made everything digital, the touch-and-feel factor is lost and people have to adapt to the digital way of saving in different asset classes. With the rise in different asset classes, all being digital, there is a huge shift and the trust gap is reducing faster. With rapid innovation and ease of execution, this trust and awareness will increase further. While digital frauds are not helping either, there is only one way of investing and that is to go digital.

With market volatility, are investors increasingly looking at investing in low-cost passive funds?
Yes, passive investing has acquired traction and acceptance in the last three years. Investors favour investments with a higher rate of return. In most cases, the cost comes at second place. Gone are the days when it was more or less certain that open-ended mutual fund schemes would outperform the index—the scheme categorisation changed in 2018, particularly in large-cap funds, and that has made it more difficult. As a result, many investors are turning to passive investing via ETFs and index funds, as the cost of active management is quite high, and volatility is also lower. So nowadays when they sense that the stocks are getting overvalued they choose to switch to passive funds.

How should young people with limited resources plan their investments so that they can have a sizeable corpus by the time they retire?
We are staring at pension-less retirement for all employees. In India, we need to set up our retirement fund and plan it out. New-age platforms offer personalised portfolios and suggestions and complete financial planning on how to build a corpus, what type of insurance should be taken and how to build the investment journey. Always start small, every journey starts with the first step. Irrespective of the investment size, start investing.