Latest news with #KshitijAnand
Economic Times
15 hours ago
- Business
- Economic Times
Retail investors are waking up to bonds—here's why it matters, says Vineet Agarwal
For decades, bonds were largely the domain of institutional investors and high-net-worth individuals, while retail investors stuck to traditional savings options like fixed deposits or insurance-linked plans. But that's changing—and fast. According to Vineet Agarwal, Co-Founder of Jiraaf, a growing number of retail investors are now embracing fixed income as a serious investment avenue. In a conversation on ETMarkets Livestream, Agarwal explains why this shift matters, how young professionals and single-income families can benefit, and why simplifying your portfolio with high-quality bonds could be the smartest move you make. Edited Excerpts – Kshitij Anand: You could say for young professionals, how can corporate bonds help in building an emergency fund more efficiently than a traditional savings account? Vineet Agarwal: So, again, the traditional concept of having an emergency fund is to maintain at least four to six months of your expenses in liquid form. Traditionally, this liquidity was kept in a savings account, either in the form of savings or fixed deposits (FDs).Now, people have started realising that the returns from fixed deposits are subpar—you're not even beating inflation—and the money lying in an FD loses value with every passing year. What smart people have now started doing, which wealthy individuals and large family offices have been doing for years, is shifting to AAA-rated or government bonds. These are now available at around 7% to 8–8.5%, compared to an FD, which gives you maybe 5% to 6%.So, when you build your emergency corpus with AAA or government bonds and get a 7.5% to 8% return, that extra 2% might not seem like much initially. But if you calculate it—2% on a 5% return is actually a 40% higher return. So, if earlier you were getting 5–5.5% from your FD and now you're getting 7.5%, that extra 2% is a significant boost. Just imagine earning a 40% higher return on your emergency fund if you hold it for 10, 15, or 20 years—the compounding effect of that extra 1.5–2% delta becomes very significant. And these bonds are liquid too, so you can sell and access your money whenever you need it. So, for young professionals, my recommendation would be: keep some money in FDs, but don't park your entire emergency corpus there. Allocate a portion to these higher-yielding, very safe, AAA-rated bonds. That 2% delta can create meaningful wealth due to the power of compounding. Kshitij Anand: And now that we've talked about young professionals, what is your advice to single-income families looking to generate a predictable secondary income using bonds? Vineet Agarwal: This becomes extremely important, especially in a country like ours. Barring a few metros, the majority of households still have a single income—typically, the male is the primary earning member. And often there are two, sometimes even three kids in the income becomes very powerful in such scenarios. Why? Because you have an opportunity today to park your surplus in fixed income bonds that offer, on average, around 12% returns. This can generate an additional income stream for the family—almost like having a second earning member.A lot of your household expenses can be easily managed through this additional income from fixed-income assets, particularly bonds. For such families, I strongly recommend—and this is something I also personally practice—that you build a good corpus and allocate a portion of your monthly surplus into fixed-income asset allocate everything into equities, especially when it comes to your short-term goals—like your child's school fees (which you may need to pay annually), purchases for the household, or family vacations. These goals can be funded through fixed-income investments that are not linked to market volatility. They are stable—you know exactly when and how much you'll fixed-income instruments can form a very healthy part of your portfolio to meet these predictable, short-term financial requirements. Kshitij Anand: What common mistakes do investors make with products like ULIPs (Unit Linked Insurance Plans) or endowment plans? And how does fixed income solve these problems, which were quite common in the past as well? Vineet Agarwal: So, again, as a country, for the last 40–50 years, almost everyone has had some form of insurance policy—either an endowment or a ULIP. Insurance is very, very good as long as it serves the purpose of happened over time is that, due to innovation, insurance gradually became an investment product—which, I believe, should not happen. A person should definitely have medical insurance for family needs and a term insurance policy so that, in case of the demise of the earning member, the family is protected. But investment should not be mixed with the endowment or ULIP plans in our country give, at best, a 5% to 6% return, which does not serve the purpose. A person should take plain vanilla term insurance and plain vanilla medical insurance. Whatever extra money is being spent on endowment or ULIP plans should instead go into pure more you simplify things, the better. We should not merge everything and complicate it—because that only gives you subpar returns. You should invest that extra money simply in bonds based on your risk appetite. If you're very risk-averse, buy AA- or AAA-rated bonds. If you're willing to take on a little more risk, you can consider BBB-rated bonds or build a portfolio across like with equities, you can build a bond portfolio and earn 10–11% returns. You'll be protected through insurance, and at the same time, you'll also create wealth in the long term. Kshitij Anand: In fact, we've heard the technical term "bond laddering." Could you explain how bond laddering works as a strategy for meeting planned future expenses? Vineet Agarwal: Bond laddering is one of the most commonly used investment strategies in bonds. I'd say it's a fancy term, but the concept is very simple. It's essentially about creating a portfolio—just like you do with equities, you invest in large-caps, mid-caps, and small-caps. Suppose you invest ₹100 in equities—you may allocate ₹40 to large-caps, ₹30–40 to mid-caps, and ₹20–30 to small-caps. The idea is that large-caps may give 10–12% annualised returns, mid-caps might deliver 13–15%, and small-caps could give 18–20% over a long investment horizon, say 10 years. This diversification gives you a balanced return—maybe 14–15% same logic applies to bonds. You allocate your ₹100 into AAA, AA, and A to BBB asset classes. AAA bonds are like large-cap stocks—they're generally the largest and safest. You could invest 30% in AAA, 30% in AA to A-rated, and 20–30% in BBB-rated again, you're building a diversified portfolio just like in equities, and this approach is called bond laddering. It's a very simple yet very powerful investment strategy. Kshitij Anand: Why do you believe fixed income investments are often overlooked by younger investors? And how can this mindset be changed? Is it because not enough reels are being created about them? Vineet Agarwal: Yes, first of all, I'd say it's due to a lack of awareness—because the product itself is relatively new. In fact, when we started Jiraaf almost four years ago, there weren't many tech-enabled solutions available for buying and selling bonds like there are a country, we're still maturing in terms of developing a vibrant bond market, and that's why many people haven't heard much about it. So, awareness is one are also a lot of misconceptions about bonds as an asset class. Many people think they're very risky. But if you look at the data, for any bond that is investment grade or above, the default rate over the past 10 years is less than 1%. So, in 99% of cases, you will get your money back on the due date—unless the company goes bankrupt. And if it's a rated bond with a rating of BBB or above, the likelihood of default is under 1%.So, lack of awareness is one issue. The second is this misconception around risk. The third reason, especially for younger investors, is that bonds aren't considered 'fancy.'People love saying, 'I own this stock,' but with bonds—nothing really changes. You invest, and you know exactly what you'll get and when. There's no daily excitement or movement to talk about. But as the saying goes in investing: if it's boring, you'll earn money. Boring businesses and boring investments often deliver better yes, bonds may not seem exciting, but they are extremely powerful from a portfolio perspective. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Economic Times
2 days ago
- Business
- Economic Times
How Bond duration impacts return in a falling rate regime, Gautam Kaul explains
Kshitij Anand: For investors, especially retail ones, could you give them a small masterclass on how rate cuts affect investor demand for different tenures of corporate bonds? I'm sure a lot of new investors—or the Gen Z ones, you could say—might not relate much to how bonds work. There's often more fear than accurate knowledge. So, if you could simplify this equation for them, that would be really great. Gautam Kaul: Live Events Kshitij Anand: Apart from that, looking at the industry more broadly—do you see the Indian bond market emerging as a relatively safe haven amid the global debt uncertainty? Gautam Kaul: Kshitij Anand: Also, let me get your perspective on ESG — one of the key themes that has emerged in both equity and bond markets. Are investors assigning a valuation premium to companies issuing ESG-compliant bonds, and what is driving the growing popularity of these instruments? Gautam Kaul: (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel As interest rates begin to soften, fixed income investors are increasingly revisiting the role of bond duration in shaping portfolio an insightful conversation, Gautam Kaul, Senior Fund Manager – Fixed Income at Bandhan AMC , breaks down how duration plays a critical role in enhancing returns during a falling rate the mechanics of price sensitivity to strategy shifts for various investor profiles, Kaul offers a clear roadmap for navigating bond markets in a changing rate cycle. Edited Excerpts –When you're investing in any fixed income instrument, there are two broad risks that you are exposed to—duration and rating. Rating refers to the credit risk associated with the bond. Duration refers to the weighted average maturity of all the bond's cash simplify, the sensitivity of a bond's price to interest rate movement is measured by its duration. For example, if a bond has a duration of one, then for a 1% change in yields, the price of the bond will rise or fall by 1%.Similarly, if the bond has a duration of 10, a 1% change in interest rates would cause a 10% change in the bond price—plus or minus. There's a bit of nuance to this, but that's the basic is this important? Because when interest rates rise or fall, the mark-to-market (MTM) impact on your portfolio is governed by the bond's duration. Bond returns come from two components: the coupon (or carry) and the MTM impact. Unless you are holding a bond till maturity, your holding period return consists of the coupon you earn—typically the bulk of the return and accrued daily—and any MTM gain or taking our earlier example: if your bond has a duration of one and interest rates drop by 1%, you will gain 1% from the MTM, in addition to your regular coupon. If you sell at that point, that MTM gain is we talk to investors about fixed income, we encourage them to look at two risks: duration risk, which drives the volatility of a bond fund, and credit risk. These are the key parameters you should evaluate before choosing which funds to invest has helped here through its categorization framework. For example, liquid funds cannot invest in instruments with maturities beyond 90 days; low-duration funds are capped at one year; short-term funds have defined duration bands. So, investors get a clear idea of the maximum and minimum duration risk a fund may example, short-term funds must maintain a Macaulay duration between one and three. So, in that case, for a 1% change in interest rates, your MTM impact could range from 1% to 3%.Earlier, it was relatively easy to assess the duration risk of a portfolio but much harder to assess credit risk. You had to dig into fact sheets and manually check the ratings of every holding. But a few years ago, SEBI introduced the Potential Risk Class (PRC) matrix—a simple yet powerful requires every fixed income fund to define the maximum level of duration risk and credit risk it can example, if a fund declares itself as PRC "A" on credit risk, that means the fund's average portfolio rating will be at least AAA at all times. If it's PRC "B," then the average rating must be at least gives the investor a clear sense of the maximum credit and duration risks associated with the fund—two of the most critical parameters when investing in fixed if you do nothing else, just look at the PRC classification. It gives you a reliable, forward-looking measure of the fund's risk yes, absolutely. In fact, I'd say India is, if not unique, certainly one of the few economies that offers both macroeconomic stability and high give some context—long-term fixed income investors are primarily trying to preserve the purchasing power of their money. That means earning returns that beat inflation, which is the holy grail. Achieving that consistently requires macro stability: low fiscal deficit, low and stable inflation, and ideally a manageable current account ticks all those boxes. Our current account deficit is low and stable. We're less exposed to tariffs compared to economies like Southeast Asia or China, which rely heavily on manufacturing exports. Our exports are predominantly services-based, which are more insulated from global tariff is also well under control—lower than the RBI's forecast and well below its upper tolerance level. The government has been fiscally responsible, reducing the fiscal deficit year after year (except during the COVID period, where even then, spending was targeted and controlled). They've also committed to bringing down the debt-to-GDP ratio over are exactly the metrics that any global fixed income allocator looks at. As a result, global investors have already started viewing India as a fixed income haven, even before our inclusion in the JP Morgan bond consider this example: If you compare two countries—one where the fiscal deficit is rising from 5.5% to 6.5-7%, and another where it's falling from 5.5% to 4.5%—you'd assume the latter is a developed market and the former an emerging one. But in India's case, it's the opposite. That speaks volumes about our policy all of this hasn't happened by accident—it's the result of deliberate, disciplined policy decisions. For a global fixed income allocator, this signals a stable environment with attractive key point: foreign ownership of Indian government bonds is still quite low—even post JP Morgan inclusion, it's under 3%. For comparison, many other emerging markets have foreign ownership ranging between 5-15%.So yes, India offers an attractive macro landscape, a deep and growing market, and plenty of headroom for increased foreign participation. I believe we're well-positioned to become a preferred destination for global fixed income as a movement — and the market attached to it — has gained significant traction and momentum in the West. In India, we are still at a very early stage of the entire ESG investing platform. Even within our landscape, equity is where we are seeing more traction compared to fixed said, we have seen some private corporates issuing ESG bonds. In fact, the Government of India also issues green bonds. So, there is a concerted effort, and of course, some demand for these instruments from specific a fixed income perspective, the market is still nascent and developing. Most of the demand for ESG bonds currently comes from foreign investors rather than domestic ones.I believe that as awareness grows, we could see ESG-dedicated funds in India as well — either from Indian or foreign investors — which could further drive investment in ESG bonds. There is great potential here, but we're still in the early the market paying a significant premium for ESG bonds? Selectively, yes. But it still needs to evolve into a more widespread and common instance, the government's borrowing cost for green bonds versus regular bonds isn't very different — perhaps just a 5-basis point green bonds were first introduced, our sense was that this premium — or "greenium," as it's called — could be much higher. That might still be the case in the future, given the early stage of the INR bond market.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Economic Times
2 days ago
- Business
- Economic Times
Corporate bonds meet arbitrage: a smarter, tax-efficient play for fixed income investors
Tired of too many ads? Remove Ads Kshitij Anand: Let me ask you, how does combining corporate bonds and arbitrage strategies help in creating a stable return profile for investors? Gautam Kaul: Tired of too many ads? Remove Ads Kshitij Anand: In fact, can you also explain what the Bandhan Income Plus Arbitrage Fund of Funds is, and how it differs from traditional debt or arbitrage funds? Gautam Kaul: Tired of too many ads? Remove Ads Kshitij Anand: Let me also get your perspective on interest rate movements. We have already seen a 50 basis point cut by the RBI, and the central bank is expected to possibly cut further over the next 12 months. How are funds like yours positioned to benefit from or be impacted by a falling interest rate environment? Gautam Kaul: Kshitij Anand: Let me also get your perspective on the retail investor side. Retail investors seem very bullish on equities, with SIP flows exceeding ₹27,000 crore. But are they also showing interest in short-term corporate bonds, or is demand largely institutional? Gautam Kaul: In a rapidly evolving fixed income landscape, investors are increasingly seeking strategies that deliver not just stability but also tax such approach gaining attention is the blend of corporate bond exposure with arbitrage opportunities — a smart way to generate steady returns while optimizing post-tax outcomes. Gautam Kaul, Senior Fund Manager – Fixed Income at Bandhan AMC, believes this hybrid strategy can offer the best of both worlds: predictable income from high-quality corporate debt and low-volatility gains from this exclusive conversation with ETMarkets, Kaul shares why this product mix is particularly suited for today's macro environment, how retail participation is evolving, and what investors should watch as India enters a new rate cycle. Edited Excerpts –I believe you're referring to the new category where there is a fund of funds that feeds into arbitrage or non-directional equity, as well as fixed idea is to provide a stable return profile. For example, in our case, the Bandhan Income Arbitrage Plus feeds into the Bandhan Corporate Bond Fund (approximately 60%) and the arbitrage fund (around 40%).What investors get is non-directional equity exposure and corporate bond exposure. In our case, the strategy is to manage the bond maturity between one to four cherry on top, of course, is the tax advantage—after two years, it qualifies for long-term capital gains (LTCG). So, it's a much more efficient way of allocating to fixed challenge we found many investors were facing was that, while they wanted to allocate to fixed income, the tax change introduced in March 2023 made them hesitant due to the imposition of short-term capital gains even on long-term fund not only provides a stable return profile but also offers a much better post-tax experience for Bandhan Income Plus is a fund of funds. For those unfamiliar with the concept, a fund of funds is a fund that, in turn, invests in other funds. So, you get a combination of different funds in a single our case, the strategy is to allocate 35–40% of the inflows to the arbitrage fund, and the rest to the Bandhan Corporate Bond Fund. As mentioned earlier, the objective is to create a stable return profile through non-directional equity believe that, for most debt investors, the majority of their investments should ideally be in the one- to five-year maturity bucket, forming the core of their long-term asset fund of funds, combining arbitrage and corporate bond strategies, provides that exposure in a more tax-efficient Corporate Bond Fund is PRC(A) rated, meaning the average rating of the portfolio must be maintained at AAA at all goal of the corporate bond fund itself is to maintain a very high-quality, liquid portfolio that offers a stable investment because it's a corporate bond fund, the idea is that most of the time, investors will earn a spread over the sovereign yield I find is that long-duration fixed income often tends to be a tactical play for investors. With equity, you can invest for the long term, but bond investments tend to be more tactical — if the RBI is cutting rates, investors get in, and then exit once the benefit is one must look beyond just the rate cuts. While rate cuts are obviously important and a major contributor to mark-to-market gains for investors, there is more to the now, the market seems fairly divided — will the RBI need to cut further, and if so, when? That's one part of the other part is about looking at relative valuations and identifying segments of the yield curve that offer value, even in the absence of a rate when you think of fixed income, consider it as a part of long-term asset allocation. Within that framework, portfolio managers like us try to exploit whatever value exists at various points on the things stand today, given that both growth and inflation are somewhat undershooting expectations, there's probably a case for rate importantly, the Reserve Bank is already providing liquidity — first through OMOs and then via the CRR cut, which takes effect from should lead to reasonable demand for both high-quality corporate bonds and government a portfolio construction perspective, depending on your appetite for duration, you could consider five- to seven-year G-Secs or corporate those with a longer investment horizon and greater appetite for volatility, we believe long-term government securities offer significant value.A 30-year G-Sec, for instance, offers immense potential — not just as a tactical mark-to-market play, but as a long-term investment where you can lock in an attractive annualised return over three decades from a Government of India credit.I think the industry has done a great job not only in promoting mutual funds but also in reinforcing the concept of asset allocation. Many concepts in finance that may seem boring — like asset allocation — are actually what work best over the long investors are beginning to appreciate that a long-term equity journey and the compounding it enables are more important than trying to make large, one-off asset allocation ensures your compounding journey doesn't get disrupted at the wrong time. Also, fixed income acts as a stabiliser in portfolios, and that need is being increasingly was some hesitation earlier, particularly due to the post-tax experience not being favourable. But with the introduction of new products, we're seeing traction from both retail and institutional investors. In absolute numbers, institutional investors stand out due to the large ticket sizes they in terms of the number of investors, we're seeing strong interest across categories — from short-term corporate bond funds to gilt, dynamic, and long-duration fund retail and HNI investors have been coming in larger numbers over the past six to twelve months.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Economic Times
22-07-2025
- Business
- Economic Times
The Golden Thumb Rule: 10-second reels won't build wealth; 10-year investing will, says Nilesh Shah
So, whenever you are at 123, staring at defeat, think of Kapil Dev's advice: Dekh lenge. Jo bhi ho, ho jaayega. Dekh lenge. As we say at Kotak Group — Hausla hoga toh ho jaayega. Welcome to The Golden Thumb Rule – a podcast where timeless investing wisdom meets real-world insights. In this episode, we're joined by Nilesh Shah, Managing Director of Kotak Mahindra AMC, as he cuts through the noise of short-term market trends and social media hype to share one simple truth: '10-second reels won't build wealth; 10-year investing will.' In a conversation with Kshitij Anand, Shah highlights why long-term investing, disciplined SIPs, and sound asset allocation remain the true engines of wealth creation — not chasing quick wins or FOMO trades. Whether you're a first-time investor or a seasoned market participant, this conversation is packed with insights to help you focus on what really matters: patience, discipline, and building your financial innings like a Test match. Edited Excerpts – Kshitij Anand: In a world of 30-second reels and 10-minute market trends, is the idea of 10-year investing just too vintage? Nilesh Shah: Undoubtedly, most people want instant gratification, even if it leads to disaster. Just like drug addicts seek short-term highs while inflicting long-term damage, there are quick-money addicts who chase short-term gains at the cost of long-term pain. So, while 10-second reels are popular, 10-year investing isn't — even though that's the only real way to build wealth. Kshitij Anand: You always talk about asset allocation, but what does that actually mean for someone just starting out with limited savings and a lot of financial FOMO? Nilesh Shah: Asset allocation, in very simple terms, is like what you do for your physical health. Most of us like sweets and farsan, but we don't make them our staple diet. Our staple diet still remains dal, roti, chawal, and sabji, which provide us physical health. Similarly, in financial health, you create a portfolio of debt, equity, gold, and real estate so that, overall, it outperforms inflation. In Episode 2 of The Golden Thumb Rule, Kotak Mahindra AMC's MD, Nilesh Shah, explains how to build long-term wealth with SIPs, discipline, and patience, even in volatile markets. Drawing on cricket and chess analogies, Nilesh Shah reveals why investing is like a test match, not T20, and how SIPs can become India's version of the 401(k). Learn how to master emotions, avoid common mistakes, and stick to your plan to beat the noise and create real wealth. Watch now to discover the golden rule of investing that works in any market. Kshitij Anand: I'll also bring in cricket here, since I know you're a big fan. We recently saw two centuries from Shubman Gill. Let's compare cricket and the equity markets. You often compare investing to cricket, and every cricketer has a favourite shot. What's your favourite investment strategy — SIPs, asset allocation, or value buying? Nilesh Shah: Before cricket, I want to mention chess. Recently, Magnus Carlsen said Gukesh is a weak player and that he didn't take him seriously. Gukesh not only defeated him but went on to win the Rapid Chess Tournament. This is how the world treats India. They say we don't matter — that we are a poor, developing country. But like Gukesh defeated Magnus Carlsen's ego, India and the Indian equity market will overcome the skepticism of global investors. We just need to keep working coming to cricket — there's T20, One Day, and Test matches. The real joy of playing is in Test matches. You take your time, build your innings, and play even on the fifth-day pitch. My favourite cricketing shot is the Test match format — where you build your innings and play for the long term. T20 is exciting, like trading — sometimes up, sometimes down — but real long-term wealth is created in the Test match Anand: Now, I also wanted your thoughts on SIPs. SIPs are seen as the OG financial advice right now. But in a volatile market, is it smart to increase SIPs, pause them, or just stay the course? I ask this because we're clocking over ₹27,000 crore monthly via SIPs. Especially for new investors, what should they be doing at this point? Nilesh Shah: Like we have SIPs, the US has something like the 401(k). I've never seen any American guru or fund manager telling their citizens to stop investing in their 401(k) plans. Month after month, it keeps getting invested, and that's built America's wealth. Today, half of American household wealth is invested in capital markets. Can we replicate the 401(k) model in India? Unfortunately, our government leaned towards provident funds, the National Pension Scheme, and so on. Mutual funds stepped in to fill that gap. And today, we have many successful SIP investors. Of course, they've faced pain. In March 2020, their portfolios were down 30%, 40%, even 50%. Three-year SIP returns were negative. Five-year SIP returns were lower than savings account returns. Ten-year SIP returns were lower than fixed deposits. At that time, there were three kinds of investors:One group said, 'let it run,' and they're now making double-digit returns, outperforming inflation, and building real second group panicked when returns turned negative. They converted notional losses into real losses by redeeming and stopping their SIPs. Today, they regret it because they missed the opportunity to make third group — a small one — was the real smart money. They said, 'This is the opportunity. SIP returns are negative, so let's invest lump sums or top up our SIPs.' Today, they've made even higher returns than regular the 401(k), SIP is the solution for financial security in India. While American households have invested half their wealth in capital markets, Indian households are still in single digits. We have a long way to go to secure every Indian's financial is a very simple concept. There will be SIP top-ups, SIPs in multi-asset allocations, and more innovations over time. But first, you have to put the car in first gear before it can move forward. Kshitij Anand: And in fact, staying with the topic, let me also get your view — when markets are booming or crashing, it's so tempting to panic-sell or FOMO-buy. How can young investors avoid these classic emotional slip-ups? We've seen these situations play out in the past few months, where markets dipped suddenly and then bounced back just as fast. Nilesh Shah: First of all, we need to be aware that we are human beings — we will naturally feel greed as well as fear. We are not some nirvana-prapt sadhus immune to these emotions. Being aware that I can be greedy or fearful is the first step in finding a solution. SIP is something very, very simple. Another approach is — when you invest, write down why you're investing. A friend of mine, a mutual fund distributor, makes all his clients write down their reasons for investing. Someone might write, "daughter's education"; someone else might say, "to support my son's business"; another person might say, "my retirement." When markets fall, returns turn negative, and investors feel fearful, his immediate response is: 'Do you need your retirement corpus today? Do you need to pay for your daughter's education today? No? Then continue. These tough days will pass.'So, we all have to figure out a way. My best advice would be: please find a hand-holder — a mutual fund distributor or a registered investment advisor — who can guide you through these tough times. Kshitij Anand: In fact, the analogy you've given is something investors can take note of and implement in their portfolios as well. And talking about portfolios — tell me something: is Gen-Z really building portfolios, or just building Pinterest boards of things they can't afford yet? What does the data say? Nilesh Shah: So again, in India, our population is so large that every rule has an exception — and that exception itself is fairly large. I've met some very, very smart Gen-Z investors. They know more about companies than I do. Honestly, I feel ashamed of my knowledge in front of them! They will become legendary investors over time. They use technology to analyse data and process information much faster than we old-school folks do. They are much better than us, even after our 30 years of experience in this the other hand, I've also met Gen-Z individuals who have no idea what they're doing. They get influenced by social media. They believe every tip that comes on WhatsApp or Telegram will make them rich. Many of them are so gullible that they believe AI-generated deepfake videos of people like us are my request to Gen-Z investors, traders, and speculators is this: one — instead of trading, focus on investing; two — please do a little bit of research. And if you don't have the time or energy for it, consult a good mutual fund distributor or registered investment advisor who can help you build your portfolio. Kshitij Anand: Good that you've brought up social media because my next question is about that — how much of young investors' money mindset is shaped by Instagram influencers, versus real financial education? Nilesh Shah: Here, we have a long distance to cover. Firstly, the next generation is far more confident about the future. For me, taking a housing loan was a huge decision. My daughters, if they have to borrow money to spend, I'm sure they'll act much faster. Secondly, because they feel secure about their future, in some sense, they've become a little careless about money. Many live off credit cards — not a good habit. Many believe in instant gratification — again, not the best way to invest. Many blindly copy what they hear in the digital please remember — apart from your parents, no one is truly interested in your well-being. This mix of emotions and overconfidence isn't necessarily creating the best outcomes. Many young investors are learning only after making mistakes. My request to them is: please learn from others' mistakes. Why make your own mistakes when you can learn from someone else's? Kshitij Anand: My next question is related — if you could give just one piece of advice to someone making their first investment decision, what would it be? Nilesh Shah: My advice would be: start with SIP. Legendary opening batsman Sunil Gavaskar always began his innings by playing in the 'V' — between mid-on and mid-off. Once his eyes were set, he played other shots. Similarly, when you're new to investing, your eyes aren't yet set — the market is like a swinging ball. So, play in the 'V' — which is SIP. Learn how SIP returns fluctuate. Learn how topping up your SIP when returns are negative can deliver better returns. Over time, you'll get a feel for how markets work. Once your eyes are set, you can start playing other shots. Kshitij Anand: And in fact, we talked about young investors, but there are seasoned investors as well who have been in the markets for quite some time. You've been a market veteran with decades of experience. According to you, or from what you've seen, what is one mistake even seasoned investors still make that we should watch out for early on? Nilesh Shah: I would say, whatever we preach, we should practice. But being human beings, we're also driven by our own greed and fear. Keeping that equilibrium is most important. We fall in love with our investee companies, and then ego sets in — 'How can I be wrong? The entire market is wrong, not me.' We stop understanding what our investee company is doing. By the time we wake up, it's too late. You have to control your a proverb that says: Abhiman toh Raja Ravan nupan nahi takhyo. Ravan was the king of Lanka, a city made of gold. He was immensely powerful and knowledgeable, yet his ego blinded him and led to his ruin. Ego, ego, and ego. As a fund manager, we have to control that. Kshitij Anand: We've all seen batting collapses in cricket. How can investors build a portfolio that doesn't collapse under pressure? I know it's a far-fetched comparison, but still wanted to put that to you. Nilesh Shah: My favourite example here is Kapil Dev's mindset. We had won the Champions of Champions trophy and then went to Sharjah. Against Pakistan, our arch-enemy, we got bundled out for 123 runs. Everyone was dejected. The world champions were staring at defeat. Things couldn't have looked worse. Everyone went into the lunchroom apparently, and no one was talking to each other — everyone was they were stepping out, Kapil Dev simply said, 'Chalo, dekh lete hain,' or something like that. The whole team went out with that desire to prove they weren't fluke world champions — they were Champions of Champions. Each one gave their best. Mohinder Amarnath made that brilliant run-out, Laxman Sivaramakrishnan bowled brilliantly, and the whole team came together. We bundled out Pakistan for whenever you are at 123, staring at defeat, think of Kapil Dev's advice: Dekh lenge. Jo bhi ho, ho jaayega. Dekh lenge. As we say at Kotak Group — Hausla hoga toh ho jaayega. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
22-07-2025
- Business
- Time of India
The Golden Thumb Rule: 10-second reels won't build wealth; 10-year investing will, says Nilesh Shah
Welcome to The Golden Thumb Rule – a podcast where timeless investing wisdom meets real-world insights. In this episode, we're joined by Nilesh Shah , Managing Director of Kotak Mahindra AMC , as he cuts through the noise of short-term market trends and social media hype to share one simple truth: ' 10-second reels won't build wealth; 10-year investing will. ' In a conversation with Kshitij Anand , Shah highlights why long-term investing, disciplined SIPs, and sound asset allocation remain the true engines of wealth creation — not chasing quick wins or FOMO trades. Whether you're a first-time investor or a seasoned market participant, this conversation is packed with insights to help you focus on what really matters: patience, discipline, and building your financial innings like a Test match. Edited Excerpts – Kshitij Anand: In a world of 30-second reels and 10-minute market trends, is the idea of 10-year investing just too vintage? Explore courses from Top Institutes in Select a Course Category Project Management Product Management Healthcare PGDM Design Thinking Degree Finance Data Science Cybersecurity Operations Management Leadership Artificial Intelligence Public Policy Technology Digital Marketing CXO MCA Data Science Others MBA Management healthcare others Skills you'll gain: Portfolio Management Project Planning & Risk Analysis Strategic Project/Portfolio Selection Adaptive & Agile Project Management Duration: 6 Months IIT Delhi Certificate Programme in Project Management Starts on May 30, 2024 Get Details Skills you'll gain: Project Planning & Governance Agile Software Development Practices Project Management Tools & Software Techniques Scrum Framework Duration: 12 Weeks Indian School of Business Certificate Programme in IT Project Management Starts on Jun 20, 2024 Get Details Nilesh Shah: Undoubtedly, most people want instant gratification, even if it leads to disaster. Just like drug addicts seek short-term highs while inflicting long-term damage, there are quick-money addicts who chase short-term gains at the cost of long-term pain. So, while 10-second reels are popular, 10-year investing isn't — even though that's the only real way to build wealth. Kshitij Anand: You always talk about asset allocation, but what does that actually mean for someone just starting out with limited savings and a lot of financial FOMO? Nilesh Shah: Asset allocation, in very simple terms, is like what you do for your physical health. Most of us like sweets and farsan, but we don't make them our staple diet. Our staple diet still remains dal, roti, chawal, and sabji, which provide us physical health. Similarly, in financial health, you create a portfolio of debt, equity, gold, and real estate so that, overall, it outperforms inflation. How to Build Wealth with SIPs: Nilesh Shah Shares 'The Golden Thumb Rule' | Episode 2 In Episode 2 of The Golden Thumb Rule, Kotak Mahindra AMC's MD, Nilesh Shah, explains how to build long-term wealth with SIPs, discipline, and patience, even in volatile markets. Drawing on cricket and chess analogies, Nilesh Shah reveals why investing is like a test match, not T20, and how SIPs can become India's version of the 401(k). Learn how to master emotions, avoid common mistakes, and stick to your plan to beat the noise and create real wealth. Watch now to discover the golden rule of investing that works in any market. Kshitij Anand: I'll also bring in cricket here, since I know you're a big fan. We recently saw two centuries from Shubman Gill. Let's compare cricket and the equity markets. You often compare investing to cricket, and every cricketer has a favourite shot. What's your favourite investment strategy — SIPs, asset allocation, or value buying? Nilesh Shah: Before cricket, I want to mention chess. Recently, Magnus Carlsen said Gukesh is a weak player and that he didn't take him seriously. Gukesh not only defeated him but went on to win the Rapid Chess Tournament. This is how the world treats India. They say we don't matter — that we are a poor, developing country. But like Gukesh defeated Magnus Carlsen's ego, India and the Indian equity market will overcome the skepticism of global investors. We just need to keep working hard. Now, coming to cricket — there's T20, One Day, and Test matches. The real joy of playing is in Test matches. You take your time, build your innings, and play even on the fifth-day pitch. My favourite cricketing shot is the Test match format — where you build your innings and play for the long term. T20 is exciting, like trading — sometimes up, sometimes down — but real long-term wealth is created in the Test match format. Kshitij Anand: Now, I also wanted your thoughts on SIPs. SIPs are seen as the OG financial advice right now. But in a volatile market, is it smart to increase SIPs, pause them, or just stay the course? I ask this because we're clocking over ₹27,000 crore monthly via SIPs. Especially for new investors, what should they be doing at this point? Nilesh Shah: Like we have SIPs, the US has something like the 401(k). I've never seen any American guru or fund manager telling their citizens to stop investing in their 401(k) plans. Month after month, it keeps getting invested, and that's built America's wealth. Today, half of American household wealth is invested in capital markets. Can we replicate the 401(k) model in India? Unfortunately, our government leaned towards provident funds, the National Pension Scheme, and so on. Mutual funds stepped in to fill that gap. And today, we have many successful SIP investors. Of course, they've faced pain. In March 2020, their portfolios were down 30%, 40%, even 50%. Three-year SIP returns were negative. Five-year SIP returns were lower than savings account returns. Ten-year SIP returns were lower than fixed deposits. At that time, there were three kinds of investors: One group said, 'let it run,' and they're now making double-digit returns, outperforming inflation, and building real wealth. The second group panicked when returns turned negative. They converted notional losses into real losses by redeeming and stopping their SIPs. Today, they regret it because they missed the opportunity to make money. The third group — a small one — was the real smart money. They said, 'This is the opportunity. SIP returns are negative, so let's invest lump sums or top up our SIPs.' Today, they've made even higher returns than regular investors. Like the 401(k), SIP is the solution for financial security in India. While American households have invested half their wealth in capital markets, Indian households are still in single digits. We have a long way to go to secure every Indian's financial future. SIP is a very simple concept. There will be SIP top-ups, SIPs in multi-asset allocations, and more innovations over time. But first, you have to put the car in first gear before it can move forward. Kshitij Anand: And in fact, staying with the topic, let me also get your view — when markets are booming or crashing, it's so tempting to panic-sell or FOMO-buy. How can young investors avoid these classic emotional slip-ups? We've seen these situations play out in the past few months, where markets dipped suddenly and then bounced back just as fast. Nilesh Shah: First of all, we need to be aware that we are human beings — we will naturally feel greed as well as fear. We are not some nirvana-prapt sadhus immune to these emotions. Being aware that I can be greedy or fearful is the first step in finding a solution. SIP is something very, very simple. Another approach is — when you invest, write down why you're investing. A friend of mine, a mutual fund distributor, makes all his clients write down their reasons for investing. Someone might write, "daughter's education"; someone else might say, "to support my son's business"; another person might say, "my retirement." When markets fall, returns turn negative, and investors feel fearful, his immediate response is: 'Do you need your retirement corpus today? Do you need to pay for your daughter's education today? No? Then continue. These tough days will pass.' So, we all have to figure out a way. My best advice would be: please find a hand-holder — a mutual fund distributor or a registered investment advisor — who can guide you through these tough times. Kshitij Anand: In fact, the analogy you've given is something investors can take note of and implement in their portfolios as well. And talking about portfolios — tell me something: is Gen-Z really building portfolios, or just building Pinterest boards of things they can't afford yet? What does the data say? Nilesh Shah: So again, in India, our population is so large that every rule has an exception — and that exception itself is fairly large. I've met some very, very smart Gen-Z investors. They know more about companies than I do. Honestly, I feel ashamed of my knowledge in front of them! They will become legendary investors over time. They use technology to analyse data and process information much faster than we old-school folks do. They are much better than us, even after our 30 years of experience in this field. On the other hand, I've also met Gen-Z individuals who have no idea what they're doing. They get influenced by social media. They believe every tip that comes on WhatsApp or Telegram will make them rich. Many of them are so gullible that they believe AI-generated deepfake videos of people like us are real. So, my request to Gen-Z investors, traders, and speculators is this: one — instead of trading, focus on investing; two — please do a little bit of research. And if you don't have the time or energy for it, consult a good mutual fund distributor or registered investment advisor who can help you build your portfolio. Kshitij Anand: Good that you've brought up social media because my next question is about that — how much of young investors' money mindset is shaped by Instagram influencers, versus real financial education? Nilesh Shah: Here, we have a long distance to cover. Firstly, the next generation is far more confident about the future. For me, taking a housing loan was a huge decision. My daughters, if they have to borrow money to spend, I'm sure they'll act much faster. Secondly, because they feel secure about their future, in some sense, they've become a little careless about money. Many live off credit cards — not a good habit. Many believe in instant gratification — again, not the best way to invest. Many blindly copy what they hear in the digital ecosystem. Now, please remember — apart from your parents, no one is truly interested in your well-being. This mix of emotions and overconfidence isn't necessarily creating the best outcomes. Many young investors are learning only after making mistakes. My request to them is: please learn from others' mistakes. Why make your own mistakes when you can learn from someone else's? Kshitij Anand: My next question is related — if you could give just one piece of advice to someone making their first investment decision, what would it be? Nilesh Shah: My advice would be: start with SIP. Legendary opening batsman Sunil Gavaskar always began his innings by playing in the 'V' — between mid-on and mid-off. Once his eyes were set, he played other shots. Similarly, when you're new to investing, your eyes aren't yet set — the market is like a swinging ball. So, play in the 'V' — which is SIP. Learn how SIP returns fluctuate. Learn how topping up your SIP when returns are negative can deliver better returns. Over time, you'll get a feel for how markets work. Once your eyes are set, you can start playing other shots. Kshitij Anand: And in fact, we talked about young investors, but there are seasoned investors as well who have been in the markets for quite some time. You've been a market veteran with decades of experience. According to you, or from what you've seen, what is one mistake even seasoned investors still make that we should watch out for early on? Nilesh Shah: I would say, whatever we preach, we should practice. But being human beings, we're also driven by our own greed and fear. Keeping that equilibrium is most important. We fall in love with our investee companies, and then ego sets in — 'How can I be wrong? The entire market is wrong, not me.' We stop understanding what our investee company is doing. By the time we wake up, it's too late. You have to control your ego. There's a proverb that says: Abhiman toh Raja Ravan nupan nahi takhyo. Ravan was the king of Lanka, a city made of gold. He was immensely powerful and knowledgeable, yet his ego blinded him and led to his ruin. Ego, ego, and ego. As a fund manager, we have to control that. Kshitij Anand: We've all seen batting collapses in cricket. How can investors build a portfolio that doesn't collapse under pressure? I know it's a far-fetched comparison, but still wanted to put that to you. Nilesh Shah: My favourite example here is Kapil Dev's mindset. We had won the Champions of Champions trophy and then went to Sharjah. Against Pakistan, our arch-enemy, we got bundled out for 123 runs. Everyone was dejected. The world champions were staring at defeat. Things couldn't have looked worse. Everyone went into the lunchroom apparently, and no one was talking to each other — everyone was down. As they were stepping out, Kapil Dev simply said, 'Chalo, dekh lete hain,' or something like that. The whole team went out with that desire to prove they weren't fluke world champions — they were Champions of Champions. Each one gave their best. Mohinder Amarnath made that brilliant run-out, Laxman Sivaramakrishnan bowled brilliantly, and the whole team came together. We bundled out Pakistan for 83. So, whenever you are at 123, staring at defeat, think of Kapil Dev's advice: Dekh lenge. Jo bhi ho, ho jaayega. Dekh lenge. As we say at Kotak Group — Hausla hoga toh ho jaayega.
