What can mutual fund investors expect in 2020? Lessons to learn from HNIs

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November 25, 2019 3:01 PM

Read on to find out the right investor approach, outlook for 2020 and traits of HNI investors which even a retail investor can imbibe upon.

Mutual Fund Investment, traits of HNI investors, Retail mutual fund investors, SIPs, maintain the asset allocation, large capsHolding capacity of HNIs is relatively longer on account of the larger scale of investible wealth and, therefore, the ability to take higher risk.

Mutual Fund Investment: Retail mutual fund investors often go with the momentum. Most of them try to either time the market or invest a lump sum when the market is at a high. When the tide turns and markets fall, they exit at a loss. While this is true for many, there are others who are making use of the potential of equities through SIPs. Also, investing in equity MFs is only part of the story, investors need to maintain the asset allocation i.e. have a proper mix between equity and debt assets for optimum returns. Rohit Sarin, Founder Partner, Client Associates, in an email interview with FE Online not only talks about the right investor approach, outlook for 2020 but also shares traits of HNI investors which even a retail investor can imbibe upon.

What is your outlook for 2020? Which asset class is expected to perform better than the others?

Indian economy is expected to gather speed in 2020 which should make equity is the best performing asset class in 2020. However, unless trade war between US and China gets settled it is going to drag the global economy which could have its impact towards allocation of global liquidity towards emerging economies and India is part of that set. Therefore, while equity could be the best performing asset class investors should have moderate expectations of returns during 2020.

Markets and valuations are at a high. Where is the HNI finding value?

It is the large caps and more precisely the top 100 companies by market cap where the valuations have become quite rich. Beyond that attractive valuations are still available. For moderate investors universe of companies ranked between100-250 by market cap could offer good value while aggressive investors could look at building exposure towards companies ranked between 250-500 by market cap.

What are those few investing traits of an HNI that even a retail investor can adopt?

Amongst various traits ability to hold over a longer period of time is the most critical. Holding capacity of HNIs is relatively longer on account of larger scale of investible wealth and, therefore, ability to take higher risk. Retail investor can address this by scientifically arriving at their suitable asset allocation and then stick to their equity allocation over a longer period of time. Second learning could be the ability of HNIs to go against the popular belief by re-allocating towards an asset class which looking relatively undervalued.

What is that single most important financial discipline that every investor should maintain?

Sticking to your long term asset allocation will help you to achieve your target growth rate which in turn shall help you to achieve your financial goals. That’s the single most important financial discipline that every investor should maintain despite the noise. Going beyond the popular belief by being contrarian will help you improve the efficiency of your portfolio even beyond your asset allocation driven returns. However, doing this on your own is easier said than done. Having a trusted long term financial advisor by your side to hand-hold you through the vagaries of the times shall help you stay on course and reach your desired destination. Therefore, do invest in this strategic relationship to ensure value addition over your lifetime.

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