Nitya Shah on financial azaadi: How to build self-reliant portfolio in today's markets
ADVERTISEMENT From your perspective, what does 'financial independence' mean for investors today? Which sectors today best represent India's march toward economic self-reliance (Aatmanirbhar Bharat)?
In today's fast paced world, 'financial independence' would mean the ability to have excess emergency funds which can cover all your expenses and those dependent on you, for at least a year. Having minimal debt, passive income from dividends, interest, rent and long term equity exposure as per your goals and risk taking appetite are some common attributes to financial independence.
Sectors that best represent Aatmanirbhar Bharat: electronics manufacturing (EMS sector), defence & aerospace, railways, industrial capital goods, speciality chemicals, pharma and food processing.In the KamayaKya smallcase, most of our manufacturing and asset heavy exposure is tilted towards India centric businesses as visibility and forecasting of earnings is more certain. For exports, we prefer asset light, service based or very specialised kinds of manufacturing. Some holdings that represent this are: MPS Ltd, VA Tech Wabag Ltd, Ramco Systems Ltd. Looking at the ongoing tariff policies, low growth, rising inflation and labour costs globally, we feel India-centric companies deserve a significantly higher allocation. This approach has led us to be one of the best return generators on a one and two year horizon on smallcase.
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Unlock 500+ Stock Recos on App Avoiding leveraged trading, F&O, stock tips which are more narrative driven than data driven and complex products are some ways of mitigating permanent erosion of capital. Focus should be towards long term investing and allocating higher capital in times of panic selling led drawdowns. SIPs are a good instrument for retail investors to begin with. It is important to note that savings and not your income, should be invested.
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To celebrate Independence Day for retail investors, they can invest in index linked funds/ ETFs or flexi cap mutual funds that give them overall exposure to the India story. Those with higher risk appetite can allocate to small-cap funds too. Investors should be mindful of not investing into theme-based funds which have already overperformed with expensive multiples, as this could lead to years of underperformance due to time correction or de-rating of valuations. Chasing discovered themes which are headlining newspapers would be futile to long-term returns. Invest in what you think is relatively undiscovered and could be trending in the near future. Markets are forward looking and always discount or factor in news flow.
ADVERTISEMENT Patience & consistency: stay invested for the long term, absorb short term falls and believe in the principle of compounding.Trust and reliability: read audited financial statements, official news and do not rely on tips and rumours.Self-reliance: try keeping an emergency corpus and have low debt. This will allow you to hold on to your investments instead of making a fire sale during panic.
ADVERTISEMENT Unity in diversity: do not over allocate into one stock or one sector, diversification is said to be the only free lunch in finance.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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