From mint · Dipti Sharma · · 2m
SIPs May Slow, But Investors Unlikely to Give Up
DSP Mutual Fund CEO says SIP flows could weaken with prolonged weak returns but investors won't quit without a significant market correction.
In brief
DSP Mutual Fund CEO says SIP flows could weaken with prolonged weak returns but investors won't quit without a significant market correction. DSP Mutual Fund CEO Kalpen Parekh warns SIP inflows may slow but investors won't abandon equities without a major market correction. Originally reported by mint.
SIP flows remain resilient
SIP flows have proved remarkably resilient despite weak equity returns, says DSP Mutual Fund CEO Kalpen Parekh.
“Flows are difficult to forecast, and if an asset class disappoints investors for five, six or seven years, some of that resilience could weaken.”
Investor resilience test
Parekh warns prolonged weak returns could test investor faith if equities disappoint for years.
“if an asset class disappoints investors for five, six or seven years, some of that resilience could weaken”
SIP growth may slow
SIP growth may not continue at the pace of the last five years but investors won't give up without a significant market correction.
“SIP growth may not continue at the pace of the last five years, but i don’t expect investors to give up unless we see a significant market correction”
New investors continue
New investors enter steadily as employment rises and confidence in SIPs and equities strengthens.
“new investors continue to enter as more people get jobs and salaries, and confidence in sips and equities is higher than it was in the past”
Key risks for markets
Parekh identifies sharp global interest rate hikes or oil price spikes as major risks, especially if the West Asia war escalates.
“the key risks are a sharp rise in global interest rates or oil prices, particularly if the west asia war escalates”
Valuations near fair value
Banks, insurance and technology valuations have come closer to fair value, allowing dsp to deploy money in these segments.
“valuations across banks, insurance and technology have come closer to fair value”
Time horizon matters
Investors should match their time horizon with asset allocation: short-term goals need conservative options, long-term goals benefit from equities.
“if you need the money within six months, you should not be in equities; if the need is 10 years away, equities make more sense because bonds may not beat inflation”
Volatility strategy
Invest when markets fall rather than rising to benefit from lower navs and avoid temporary capital losses.
“if you understand volatility, invest when markets fall or move sideways rather than getting overly excited when they rise”
Asset allocation advice
Parekh recommends 40% of portfolio outside equities, bonds, debt funds, gold and precious metals, for balanced risk management.
“around 40 percent of my own portfolio is outside equities, in bonds, debt funds, hybrid portfolios, gold and precious metals”
Common investor mistakes
Investing without anchors, chasing past performance, and ignoring underlying business metrics are top mistakes investors make.
“the first is investing without anchors, based on someone else’s view rather than your own needs, time horizon and risk tolerance”
Downside risk assessment
Investors must evaluate worst-case scenarios to avoid permanent capital loss when choosing funds.
“if you have a three-year horizon and need the money for a house, look at the worst three-year outcome”
Gold as diversifier
Gold has low correlation with equities but high volatility; Parekh reduced gold from 22% to 13% of his portfolio.
“personally, i have reduced gold from 22 percent of my portfolio to around 13 percent”
SIP mechanism benefits
SIPs ensure discipline by buying through market highs and lows, improving returns when markets fall first.
“the path markets take also matters: if markets fall first and recover later, sip returns can be better because more units are accumulated at lower navs”
What happens next
Parekh expects SIP inflows to remain resilient but may shift allocations if valuations reset further.
“if valuations reset further, i may move towards a more aggressive equity allocation”
The big picture
DSP Mutual Fund CEO Kalpen Parekh warns SIP inflows may slow but investors won't abandon equities without a major market correction.
