How Should MF Investors Position For Next 5 Years?: Kalpen Parekh & Amit Kukreja Decode

Summary

The Mutual Fund Show, hosted by Alex Matthew, discusses strategies for mutual fund investments amidst market volatility. The show features Kpin Parik, CEO of DSP Mutual Fund, who addresses concerns about recent SIP data and equity market trends. They delve into thematic funds' popularity and the importance of timing investments. Parik emphasizes the long-term benefits of equities and the stability of corporate India's growth rates, recommending hybrid portfolios to balance asset classes. Amit Kukreja joins the discussion, comparing ETFs and index funds, and advising on systematic investment plans for market dips and retirement planning.

Takeaways

• 📈 The mutual fund show aims to provide actionable information to help viewers make informed decisions when investing in mutual funds.
• 📊 Despite market volatility, the long-term trend of SIP investments has been strong, with a consistent flow of new investors joining the industry.
• 💡 The managing director of DSP mutual fund suggests that investors should focus on profit growth and return on equity (RoE) when considering long-term investments.
• 🤔 Concerns are raised about investors potentially buying into 'hot' themes at the peak of their cycle without understanding the associated risks and volatility.
• 🕒 The June 4th market dip highlighted issues with transaction cut-off times and the need for aggregators to ensure timely investment execution.
• 🌐 The importance of diversification in a portfolio is emphasized, suggesting a mix of equity, bonds, and other asset classes to mitigate overvaluation risks.
• 💼 Amit kukreja, the founder of am Amit cra.com, discusses the challenges of timing the market and the benefits of systematic investment plans (SIPs) over trying to capitalize on short-term market fluctuations.
• 💹 The script touches on the performance of thematic funds, which have delivered superior returns in recent years, attracting significant investment flows.
• 📉 The potential for missed investment opportunities due to cut-off times is acknowledged, but the long-term impact is considered minimal for disciplined investors.
• 🏦 The role of banks and financial institutions in facilitating real-time transactions is highlighted as crucial for investors looking to capitalize on market dips.
• 📝 A reminder that the costs associated with ETFs should be considered in the context of overall investment strategy, including brokerage fees and transaction costs.

Q & A

What is the main focus of the Mutual Fund Show?

The Mutual Fund Show focuses on providing actionable information to help viewers make informed decisions when investing in mutual funds.

What was the recent experience in the equity markets that Alex Matthew referred to in the show?

Alex Matthew referred to the 'chop and churn' in the equity markets over the last week and a half, which likely refers to significant volatility and fluctuations in stock prices.

Who is Kpin Parik and what is his role in the discussion?

Kpin Parik is the Managing Director and Chief Executive Officer at DSP Mutual Fund. He joined the show to discuss positioning and portfolio management in the context of recent market experiences.

What is the significance of the SIP number mentioned in the script?

The SIP (Systematic Investment Plan) number, close to 20,900 crores since July of the previous year, signifies the amount of new investments coming into the mutual fund industry, indicating a trend of increasing participation from new investors.

What does Kpin Parik suggest about the gross to net SIP ratio and its implications?

Kpin Parik suggests that the gross to net SIP ratio, which is around 40 to 50%, indicates that while there are many new investors joining, there is also a consistent 'leakage' or closure of SIPs from existing investors, which is a common trend over a long period of time.

What was the total flow into Equity mutual fund schemes as discussed in the script?

The total flow into Equity mutual fund schemes was discussed to be well over 30,000 crore rupees, closer to 35,000 crore rupees, with a significant amount going into thematic funds.

What is the 'iron law of fund selection' as mentioned by Kpin Parik?

The 'iron law of fund selection' refers to the human tendency to invest in funds based on their past performance, which can lead to investing in funds that have recently delivered superior returns but may not necessarily continue to do so in the future.

What issue did investors face on June 4th when trying to 'buy the dip'?

Some investors faced the issue of their funds being received after the cut-off time, which meant they did not get the NAV (Net Asset Value) of the day they intended to invest, but rather the NAV of the next day when the market had already recovered.

What is the role of aggregators in mutual fund investments as discussed in the script?

Aggregators play a crucial role in facilitating the transfer of money from investors' accounts to mutual fund scheme accounts, especially for banks that do not have real-time transmission capabilities.

What are the two key factors that Kpin Parik identifies for long-term equity returns in India?

The two key factors identified for long-term equity returns in India are the profit growth rate of corporate India, which has historically been between 13 to 15%, and the Return on Equity (RoE), which is typically between 18 to 22%.

What is the recommended approach for investors with a 5 to 7-year time horizon according to the discussion?

For investors with a 5 to 7-year time horizon, the recommended approach is to have a hybrid portfolio that blends multiple asset classes, which can help mitigate the impact of overvaluation and provide stability in returns.

What is the current 10-year Sovereign bond rate in India as per the script?

The current 10-year Sovereign bond rate in India is at 7%, which is considered stable with a potential downward drift.

What are the two main risks that a bond investor should be aware of?

The two main risks that a bond investor should be aware of are interest rate risk and credit risk.

What is the difference between investing in ETFs and index mutual funds in terms of cost?

While ETFs generally have a lower expense ratio than mutual funds, the overall cost can be higher due to additional costs such as brokerage fees and DMAT account costs for transactions.

Why might an investor choose to invest in ETFs over index mutual funds?

An investor might choose to invest in ETFs over index mutual funds for the ability to buy or sell at a specific price during market dips, providing more control over the entry and exit points of their investments.

What is the recommended minimum holding period for midcap investments according to Amit?

The recommended minimum holding period for midcap investments is eight years, as it allows for better returns over the long term due to the higher volatility associated with midcap stocks.

What is the potential accumulation for a 56-year-old investor starting an SIP of 10,000 rupees per month in the HDFC midcap opportunities fund with a 5-year time horizon?

With a 14% compound annual growth rate (CAGR), the potential accumulation for this investor would be approximately 8.5 lakhs over a 5-year period.