Best mutual fund investment strategy to face volatile 2023, according to Chintan Haria of ICICI Pru | The Financial Express

Best mutual fund investment strategy to face volatile 2023, according to Chintan Haria of ICICI Pru AMC

Adopting a multi-asset investment plan is the optimal course of action for navigating through uncertain times, says Chintan.

best mutual fund investment strategy
How mutual fund investors can face recession, volatility in 2023, according to an expert. Representational image

Talks of global recession, economic downturn, market volatility and uncertainties often leave mutual fund investors with many doubts. In such a situation, deciding the best investment strategy becomes a tall order. However, investors may take some cues from ongoing developments in the markets and the views of trusted financial advisors and experts who are detailing with them on a daily basis.

In an e-mail interaction with the FE PF Desk, Chintan Haria, Head of Investment Strategy, at ICICI Prudential AMC, shares his views on the best strategy that investors should follow while also reflecting on some other issues of interest.  Edited excerpts:  

What could be the best investment strategy for mutual fund investors to face a volatile 2023?

Adopting a multi-asset investment plan is the optimal course of action for navigating through uncertain times. Here, one will have exposure to various asset classes like equity, debt, commodities and several more. If one is unsure how to go about it, then one may consider a multi-asset category fund. 

There is much noise around probable global economic recession in 2023. A similar noise was there in 2022 as well but India thrived. Do you think India will do economically well in 2023 as well?

India is one of the few structurally sound marketplaces which today offers a long-term secular growth story. The possibility of a recession is expected to affect a number of developed economies. Even if a global recession were to play out, the impact on India is likely to be minimal. Even in terms of corporate earnings, we are optimistic about the rate of earnings growth.

Also Read: Top Mutual Fund scheme categories in January 2023

If there is a global recession, how should mutual fund investors prepare to face it?

It is advisable for investors to stick to their asset allocation and continue making investments gradually through SIPs. Given the potential for short-term volatility, investors can consider a multi-asset approach to investing.

Between investing individually across market capitalizations and a multi-asset scheme, which one would you recommend?

An investor can invest independently across market capitalization and asset classes if they have the know-how of numerous asset classes and the variables that may have an impact on each of them, and can actively track and rebalance when necessary. Most often, a lay investor may not always be able to keep up with the market and economic events and make the necessary adjustments to their portfolio.

For all such investors, a multi-asset scheme tends to be more practical. Here, the fund manager, basis the relative attractiveness of the various asset classes will take the required exposure and rebalance when required. When such rebalancing is done at an individual level, every sell transaction attracts a short or long-term capital gains tax. But when the same is done at a fund level, an individual does not incur any tax. As a result, from the perspective of a lay investor, investing in a multi-asset scheme typically tends to be significantly more tax-efficient.

Also Read: Use quant funds as a diversification tool

Index funds have gained popularity over the past few years. What according to you is the reason behind their rising popularity? 

As savings in India have steadily expanded over the past few years, investment products have gained more momentum. Today, people are open to investing outside of traditional investment options. There is an increase in investor interest in stocks, mutual funds and other financial instruments. The ease of understanding and simplicity of index funds has aided in their proliferation among the masses. For investors looking at participating in India’s growth story may invest in passive index funds as they endeavour to provide exposure to diversified stocks as per the index methodology.

If an investor desires to build a balanced portfolio using only passive offerings, how should that investor proceed?

When putting together a portfolio, deciding on asset allocation as per one’s risk appetite and financial goals is of prime importance. A balanced portfolio should have an allocation to various asset classes such that even in the event of a negative development in one asset class, the entire portfolio is not impacted. Investors have a variety of options for allocating their equities, including market capitalization-based index funds or ETFs, sector- or theme-based index funds or ETFs, and smart beta ETFs. For debt allocation, investors can choose between target maturity funds, liquid ETFs or G-Sec ETFs. When it comes to commodities, today, investors have the choice of gold and silver ETFs. The alternative approach is to opt for a passive multi-asset fund in which case the fund manager will take the onus to allocate across various asset classes and rebalance as and when necessary.

(Views expressed above are the personal opinions of the respective commentator and do not reflect the official position or policy of Financial Express Online. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing)

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First published on: 10-02-2023 at 15:50 IST
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