A majority of analysts who participated in BT Digital Diwali Survey said 40-70 per cent weightage could be assigned to stocks; they found 20-45 per cent allocation to debt as reasonable; gold could be assigned 5-15 weightage while investments in crypto, if at all, could be restricted to 5 per cent, they said.
To be sure, there is no ‘one size fits all’ asset allocation, as it is incumbent on multiple factors such as age, income, liabilities and dependents. Risk appetite is crucial here. The survey’s aim was to get a sense of which asset class analysts are bullish on.
Shrikant Chouhan, Head of Equity Research at Kotak Securities said he would assign 60 per cent to equities, 30 per cent to debt, 10 per cent to gold and nil investments in cryptos.
Deepak Jasani of HDFC Securities also stayed away from cryptos. He assigned 65 per cent weightage to equities, 25 per cent to debt and 10 per cent to cryptos.
Siddarth Bhamre, Head of Research at Religare Broking said he would assign 70 per cent weight to equities, 25 per cent to debt and 5 per cent to cryptos with nil investments in cryptos.
Vinod Nair of Geojit Financial Services said he would want 40-60 per cent of investment in equity, 25-30 per cent in debt and 10 per cent in gold. Nair said he would keep 10-15 per cent i.e. Rs 1-1.5 lakhs in cash.
Vinit Bolinjkar, Head Of Research, Ventura Securities said he would spend Rs 10 lakh, with 60 per cent investments in stocks, 25 per cent debt, 10 per cent in gold and 5 per cent to cryptos.
Deepak Singh of Reliance Securities said he would spend 60 per cent in equity, 30 per cent in debt, and 10 per cent in gold.
“We feel that 70 percent of one’s investments should go into equity across the board – large-cap, multi-cap, balanced and index funds, 10 per cent in gold as a safe haven asset, and 20 per cent in fixed income securities which will give stable returns,” said Mohit Nigam, Fund Manager & Head – PMS at Hem Securities.
A total of 15 brokerages and mutual fund houses were asked how would they allocate Rs 10 lakhs this Diwali to make most of opportunities out there.
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Taking other factors into account
Sunil Nyati, Managing Director at Swastika Investmart advised average investors to follow the “Rule of 100 minus Age”.
The rule works pretty well in most circumstances, he said.
“According to this rule, the age of the investor should be subtracted from 100 and the resultant number should be the proportion of equity in one’s investment portfolio. For example, if the age of a person is 25, then the equity allocation in their portfolio should be at least 75 per cent (100-25). The balance of the portfolio can be allocated to debt, real estate, cash, and other investments,” Nyati said.
Nyati does not count cryptos as an investment and thus advised investors not to invest more than what one can afford to lose. He sees maximum investment in gold should be restricted to 5 per cent of the total net worth of an individual.
Neeraj Chadawar of Axis Securities has a few combinations.
For a risk averse investor, he advised nil investment in equity, 70 per cent in debt and 30 per cent in gold. For conservative investor he advised 20 per cent in equities, 70 per cent in debt and 10 per cent in gold. For balanced investor, he advised 50 per cent in equity, 35 per cent in debt and 15 per cent in gold. For investors seeking growth, 70 per cent in equity, 15 per cent in debt and 15 per cent in gold is advised. Finally for aggressive investors, Chadawar said 90 per cent investment in equities and 5 per cent each investments in debt and gold is advised.
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Sanjay Chawla, CIO- Equity at Baroda BNP Paribas Mutual Fund said asset allocation must be mapped to investor profile. Amongst various other factors, he said, he would look at the age, earning profile, other liabilities, and other risk profile of investor. Finally, it is important to understand objective of the investment, including the financial goal, he said.
“After answering the above queries, if this Rs 10 lakh is a surplus available for the long term and that we have no other investments at this point of time, we would roughly go with a 75 per cent exposure to equities for growth. We would allocate the balance equally between debt (short term income funds) for stability and gold as a currency / inflation hedge,” he said.
Marc Despallieres, Chief Strategy & Trading Officer at Vantage said if we have a passive investor, willing to take a higher level of risk, and does not need funds in the next three to five years, putting 60-70 per cent in equities, 5 per cent in gold, 5 per cent in cryptos, and the rest in bonds, look good option.
“As an active investor, you could further divide your equity portfolio to include short-term trading amid market volatility, as a hedge against your long term portfolio. For more conservative investors, increasing the allocation to debt would be advisable. A middle-of-the-road approach could be to put 45 per cent of your investible resources in equities, 45 per cent in debt, and split the remaining between cryptos and gold,” he said.
One of the biggest mistakes one could make is to use the funds one needs in the short-term – within the next two or three years – in the equity market.
“You may run into a situation when you are forced to sell high-potential stocks when market conditions are not favourable, Despallieres warned.
Sumit Chanda, Founder and CEO of JARVIS Invest said if he was a 25 year-old with zero liabilities, he would have invested 100 per cent in equities.
“If I were a 40 year old with a spouse and child, I would be considering a goal-based investment, which will include allocation to debt, equity & gold. There are way too many variables at play to comment on the mixture. My suggestion would be to talk to an advisor who can carry out a complete financial assessment and can then come up with a suggestion,” he said.
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