Mint, along with the Hindustan Times and NDTV, brings you a personal finance show called Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-linked issues. This is an edited transcript of the show that was aired over the weekend on NDTV Profit and NDTV 24x7.
Natarajan: Let’s kick-start this year with the serious intention of making the most of our money and hard-earned savings. The panel on the show: Gagan Randev, CEO, Religare Securities Ltd; Pankaj Razdan, deputy chief executive, financial services, Aditya Birla Group; and Sunil Singhania, head of of equity investments, Reliance Mutual Fund.
The panel will flesh out the five biggest resolutions you need to make to get richer this decade. Sunil, give me a sort of an ideal portfolio—for a 30-year-old or a 40-year-old. How aggressively could they go into equity and at the same time look at other asset classes?
Investment tips: (L-R) Manisha Natarajan, Monika Halan and Gagan Randev at the Let’s Talk Money show. Photo:Ankit Agrawal/Mint
Singhania: For most of the young guys that would be the peak period of their career and that is also a point of moving into a high level of personal income and savings. Given that their future will be as bright, a big portion of their savings should go into equity. It can be around 50-60%. Because of the way we have been brought up and the fact that we need gold for some or the other function in the family and also because it provides a decent diversification, 10% allocation for gold will not be out of context.
Natarajan: Pankaj, you mentioned in last week’s episode that traditionally investors have been locking their money into real estate and gold and this is likely to change over the next decade. How convinced are you about this change? What sort of returns do you see from equity if you take a 5-10-year period.
Razdan: Having 60% of our savings in physical assets—I don’t see that changing drastically. Financial assets, as Monika pointed out sometime back, are pushed into our savings account; that money has to start moving out. As I said, the big trend in the country is consumption because people want to spend money on themselves and consume things beyond food articles...for their house, car, vacation. The financial saving pool is going to get into consumption and specially, with a 30-40 years age bracket, your pool is going to shrink a little bit. So obviously you need to go and invest in an asset class which is going to give you higher returns. My belief is that this will start moving into the equity market... When investing in the equity market, one has to keep in mind that equity markets have given 100% returns. Typically, any other alternative asset, whether its’s a...bank deposit or any comparable instrument, you add inflation to that, and you make 3-4% over that.
Natarajan: Gagan, what’s your ideal portfolio?.
Randev: I would say that in the next 10 years, if you are a 30-year-old, you should see about 50% (of your savings) in equity and when you 40, typically the formula you use is ...(proportion of investment in) real estate plus equity should be 100 minus your age.
Given where we are and the kind of growth we have had in the last five years, I don’t see real estate growing at the same pace. I think it’s quite over-valued at this point... Sooner or later we will have to find alternative asset classes to make money for us in the next 10 years.
Halan: A simple mantra is that about the age of 45 if you have got your PF (provident fund) deduction going, 24% of your income is already going into a safe investment. You have another Rs70,000 going into PPF (public provident fund)... Whatever is left, start putting that into equity...even at 60, 20% of your money should be in equity to get that beat against inflation
Natarajan: A brand new year means brand new resolutions and that’s what we intend to make you do in the next 10 minutes, a rapidfire summary from our experts on what will help you create maximum wealth.
Razdan: I think the first thing is that everybody should clean up their portfolios, to get rid of all the junk (in them) and actually get back to investing, whether it’s on the basis of research or through mutual funds. The second thing which is very critical is to invest in a financial planner and do a proper financial plan. Once you have decided what your allocation is, invest according to that and stick to it.
Natarajan: We all need to work this through with the finance ministry, with the regulators as well, that you need to have some rating system to rate financial planners so that people can go out and trust them. There is a big gap there. Sunil do you feel the gap?
Singhania: I think there is a need for more financial planners. There is a need to continue education for those financial planners, but ultimately it will boil down to the investor willingness to pay for the services of these financial planners, which would determine the quality of these financial planners... From an investor’s perspective, they should be very clear that a good financial planner will come at some fee and they should be willing to sacrifice that small fee, which would be compensated by the differential return they will make out of good financial advice.
Razdan: We will have to inculcate this habit of going to a financial planner for financial advice. Unless you have a plan for it, you will not have discipline, you will not invest regularly.
Halan: People will pay if they trust the planner; they don’t know whom to trust. You have to have a government agency which will certify the planners, only then will the retail investor be able to find these planners and trust them and move the money which they really want to move into equity and products that you all are selling.
Natarajan: Let’s raise a final toast to a decade which will give us all tremendous opportunities to create wealth. Stop being lazy and start seeking high-growth investment avenues. Choose carefully and monitor well. Just don’t miss out on India’s richest years, make them yours.