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Investment roadmap for next five years…


Asset allocation acts like a compass; which guides the investors in their journey of wealth creation and successful investment. Asset classes like equity, debt, real estate and gold have different levels of risk and returns, and they behave differently over a period of time, so a judicious mix of all asset classes’, results in optimum return and lower risk. Without venturing into the specifics let us take a general approach for laying down the investment roadmap for a five year term catering to all categories of investors.

Going forward India’s growth story remains intact on the back of strong reforms coupled with an uptick in GDP growth rate, thus providing conducive environment for the India Inc’s; which makes a strong case for equity investments. We expect direct equity to grow at a CAGR of more than 21% over the next 5 years, surpassing other asset classes by huge margin source: Karvy India Wealth Report 2017. In the current market scenario, we prefer the bottom up approach to stock picking and concentrated portfolios comprising of stocks with visible earnings growth. Investors should invest in equities in a staggered manner through various routes like direct equity, mutual funds, PMS, Unlisted Equity and AIFs.

A healthy portfolio should have a decent allocation to fixed income products. Fixed income as an asset class had faced head wind in recent times; though going forward, expectations of any sharp rise in the bond yields is comparatively less. Exposure to a mix of mutual fund including good quality corporate bond funds, accrual funds and dynamic bond funds are suggested, keeping in mind the present interest rate scenario. Gold as an asset class performs well when the Equity markets underperform and thus acts both as an equity and inflation hedge. Therefore a small part of the portfolio should comprise of investment in gold through ETFs or Sovereign Gold Bonds (SGBs) but not more than 10% of the portfolio.

Fascination for real estate investment for Indian investors is no secret. Though Real estate as an asset class have underperformed in recent times, the property prices have retracted from peak levels, thus providing the long-term investors a better risk-reward investment scenario. Current scenario provides investment opportunity in affordable housing, Pre-leased Commercial properties and innovative avenues like student housing.

It is rightly said,”Do not put, all your eggs in one basket‘’, therefore the long-term portfolio should ideally be a mix of all the asset classes as mentioned above in different proportions as per the risk profile of investors. Equity should form a major portion of the portfolio followed by Debt, Real estate and Gold.

Mr. Abhijit Bhave, CEO, Karvy Private Wealth

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