How can women start their investment journey? Ft Radhika Gupta and Twinkle Jain

Summary

In this engaging conversation, financial expert Radika shares insights on investing strategies and personal finance. She likens investment choices to food, recommending a balanced portfolio with 80% stable funds like flexi-cap and index funds, and 20% riskier, higher-return options. Radika emphasizes the importance of avoiding panic during market downturns, stressing long-term goals and risk assessment. She also discusses the value of diversification, the role of gold in asset allocation, and offers advice on real estate versus renting. The session concludes with personal anecdotes and valuable advice for women on taking control of their financial future.

Takeaways

• 😀 80% of a portfolio should be in 'Dal Chawal' funds: long-term, steady investments like flexi-cap and index funds, which stand the test of time.
• 😀 20% of a portfolio can be in riskier, higher-reward options like 'Hakka Noodle Biryani', allowing for some flexibility in choosing more speculative investments.
• 😀 During market downturns, it's important to switch off the news and avoid making hasty decisions based on fear or anxiety.
• 😀 It's natural to feel anxious in challenging market times, but this doesn’t mean you need to take immediate action; sometimes doing nothing is the best option.
• 😀 Market corrections provide a valuable opportunity to understand your actual risk appetite, without taking rash actions.
• 😀 A balanced portfolio should be diversified across large, mid, and small caps, offering a mix that captures the growth of the Indian economy.
• 😀 For people in their 20s and 30s, having 60-70% equity exposure is ideal, but it’s crucial to also have a contingency fund for unexpected events.
• 😀 Avoid over-diversifying by holding too many mutual funds. Aim for a portfolio of around 8-10 funds, choosing different categories and different asset management companies (AMCs).
• 😀 Gold can be part of a diversified portfolio, but for long-term wealth creation, Indian equities are generally a better option.
• 😀 A primary home should be considered an emotional decision rather than a financial one, as it provides security and stability, beyond its investment value.
• 😀 Women are great savers and have historically managed household budgets well. Transitioning from saving to investing is a crucial next step for financial empowerment.

Q & A

What is the recommended asset allocation for someone starting out in their 20s or 30s?

The ideal asset allocation should be 60-70% equity biased for people in their 20s or 30s, assuming no unique circumstances. It's important to ensure a contingency fund is also in place for unexpected situations.

What are the benefits of keeping a diversified portfolio?

Diversification helps protect the portfolio from risk by including assets that perform well at different points in time. A diversified portfolio across multiple AMCs and asset classes is essential to capture different market movements.

How can one handle market corrections during challenging times?

During market corrections, it's important to switch off the news, resist the urge to act out of anxiety, and understand that short-term drops don't necessarily require immediate action. It's also a good time to assess your risk appetite.

What should be the role of gold in an investment portfolio?

Gold can be part of an asset allocation, ideally around 10-20%. However, it's essential to differentiate between physical gold (jewelry) and investment gold, with the latter being more practical through financial gold options like ETFs and index funds.

How does one balance large, mid, and small-cap investments in their portfolio?

A balanced approach is recommended. Including large, mid, and small-cap funds in a portfolio helps capture the broader growth of the economy. A mix of these ensures exposure to various sectors without relying on any single one.

Why should SIPs (Systematic Investment Plans) not be paused during a market downturn?

Pausing SIPs during a market downturn may seem tempting, but it's often counterproductive. Market corrections create an opportunity to buy mutual fund units at a lower price, and continuing SIPs helps average the cost over time, ensuring long-term growth.

What common mistake do young investors make when starting out in the stock market?

A common mistake is over-investing in equities, especially when young. While the logic might be to go heavy on equities, it’s essential to maintain a balanced approach and not risk everything on a volatile asset class.

What is the recommended number of mutual funds an investor should hold?

A typical investor should aim to hold about 8-10 mutual funds in their portfolio. This includes a mix of categories like flexi cap, midcap, debt, and international funds. It's essential to choose funds from different AMCs for diversification.

How do emotional factors influence investment decisions?

Emotional factors, such as fear during market downturns or the desire for immediate gratification, can lead to impulsive decisions. It's important to manage emotions, make rational decisions, and focus on long-term goals.

Why is it important for women to be actively involved in managing family finances?

Active involvement in family finances helps ensure transparency, reduces the risk of financial mismanagement, and empowers women to make informed decisions. Women are often excellent savers, and developing investment knowledge is the next step.