Asset Allocation: Be patient, next one year will be extremely difficult: Neeraj Choksi

“The message for one year is extremely difficult but composure and patience is key in equity markets. The moment you are patient and have a disciplined investment process –either through SIPs or lump sum money – it works,” says Neeraj Choksi, Owner, NJ Group.

The last one year saw the renaissance of the Indian investor. The strength and confidence the Indian investor has displayed in the last one year absorbing all the FII selling. How have you observed this change?
In the last few years, probably in the last decade, the SIP theme has come out quite well. At the industry level, everyone has been promoting systematic investment plans. Irrespective of the market cycles, SIP is an investment avenue. Investing through SIPs has always been profitable and the risk is quite less compared to investing at higher market levels.

Generally people tend to invest when markets are booming but SIP has now become of the mainstay of investments and that is where one can see that despite all the FIIs’ selling, we have been getting good domestic investment inflows. A large component of that is because of the SIP and the entire industry should be complemented for that. If that is going to be the trend then that is one of the simplest ways of creating wealth,creating real returns over a period of time.

How are average SIPs increasing or are the durations increasing and amounts increasing? We have seen the SIP numbers hit the record level of Rs 13,000 crore despite the volatility. When you talk to your key distributors across the country, what is the kind of data which is coming out?
The amount has also increased and the top up in SIPs has started increasing. Previously there used to be retail investments. From an average of Rs 15,000 per account on SIP. It has moved to approximately Rs 5,000. That trend is also increasing and there is a far higher acceptance of SIPs, particularly among the new investors.

That trend has always been increasing, apart from one year in between. We have seen net addition in SIPs, both in terms of account as well as in terms of the net inflows. You also get the closures after three years and five years through SIPs. But then there are new additions to it and several of these SIPs are getting renewed again after three years, five years. There are a lot of perpetual SIPs also. It has been a good experience in terms of selling as well.

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One data point one of the analysts was sharing with me is that almost one-third of the country’s population now have PAN cards but less than 5% of the population invests in financial assets. Even if it takes 10% to 15% variance, do you see a runway of 10-15% growth in SIPs?
Yes, it is needless to say that there is an immense opportunity because the financialization of assets has not happened in a big way. There is a huge opportunity, irrespective of PAN cards or the bank account numbers or anything like that.

There is a huge potential in terms of the fact that at least 10 to 15 crore population has an investable surplus and they are potential participants in SIPs and that again gives us a huge opportunity in terms of catering to them. By and large, the experience has been good. I think it is happening at a very rapid pace and one can see that in these numbers as well.

What is the key message your research team and the top team which works very closely with big distributors is sending to the investor community for the next one year?
The message for one year is extremely difficult but composure and patience is key in equity markets. The moment you are patient and have a disciplined investment process –either through SIPs or lump sum money – it works.

If there is a risk averse investor, then you can always go by an asset allocation which can be linked to your own risk profile or based on the market risk profile. But these are the simple things which one needs to do and one needs to do it in a disciplined manner. You do not need to be an expert in analysing trends or markets.

That is extremely difficult and the chances of failures are higher but the moment you stick to discipline and a plan, it works well. That has been our experience over the last 25 years and we have been giving that similar message time and again to our investors, to our distributors and to the entire investment world.

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