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Sundeep Sikka’s incremental investments go only into equity. However, that wasn’t always the case, says Sikka, ED & CEO, Nippon India Mutual Fund. “At the start of my career, I used to invest in traditional debt products. Over the years, equity allocation has increased as I’ve realized it is the best asset class," he said during an interaction with Mint for the Guru Portfolio series. In this series, leaders in the financial services industry share how they manage their own money.

The portfolio

About 70% of Sikka’s investment portfolio is in equity, which is spread across mid-cap and small-cap funds. He does not invest in direct stocks. “After 2009, when I became the CEO, I haven’t invested directly in a stock to avoid conflict of interest. The only stock I hold is of Nippon in the form of ESOP (employee stock ownership plan)," Sikka said.

On whether he would call himself a high-risk investor since his portfolio largely comprises small- and mid-cap segments, Sikka said he sees himself as a lazy investor instead. “I like to stay invested for longer periods of 10-15 years, in which small- and mid-caps tend to fare better, so they become the preferred choice. An investor can be said to be taking additional risk if he chooses to invest in small-cap for the short term."

For the same reason, he doesn’t make changes between market segments or schemes too often, neither in equity nor in debt.

“Active churning of portfolio depending on market activity may sometimes give you a rush that some action is happening. But I’m a firm believer of keeping emotions in check. Don’t let your emotions, market momentum or news flow take over your investment decisions as they should always be taken with a goal in mind," Sikka said.

Elaborating on his strategy, he said what’s important is getting the right asset allocation while investing, and after that one just needs to ride the market. “You can call me a passive investor in active schemes," he adds.

Sikka has been investing in international equity for five years, though its percentage share in his overall portfolio is low. He prefers geographical allocation instead of picking funds on generic themes. “For instance, if I want to see the upside in semiconductors, I’ll invest in Taiwan funds," he said. Almost 99% of Sikka’s financial assets are in Nippon India Mutual Fund.

Sundeep Sikka, ED and CEO, Nippon India Mutual Fund
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Sundeep Sikka, ED and CEO, Nippon India Mutual Fund

Gold and real estate

Sikka is not bullish on real estate as he believes that appreciation in the asset class doesn’t happen the way it used to until some years back. Additionally, liquidity and rental yields are low, while the cost of maintaining properties is high, according to him.

Real estate makes up 10-12% of his portfolio, which includes the house he resides in and inherited property. As for gold, he has a small allocation of 3-5%, but all of it is in gold exchange traded funds (ETFs). “I have never bought physical gold for investment," Sikka said. On being asked how he views gold as an investment class, Sikka said gold acts as a natural hedge against both equity and bond.

Family and finances

For Sikka, wealth means three things—health, education and relationships. “By education I don’t mean just formal education, but your constant endeavour to get better everyday compared to what you were yesterday," he said.

When one substitutes wealth with just money, the purpose of life becomes myopic, as per Sikka. “Money and career should be a means to achieve the three wealth goals of health, education and relationships."

Sikka’s wife has always been involved in all their investment decisions and her engagement in the family’s finances has increased significantly post-Covid.

Sikka rues the fact that he was late to equities as he was always taught to invest in traditional instruments of bank deposits and provident fund. Having learnt from his own late start, he regularly educates his children about the importance of including equity in one’s investment portfolio to create long-term wealth.

Among other lessons, Sikka wants to imbibe saving habits in his children early on. “I tell them earning is not enough if you don’t save and invest it in the right asset classes."

Sikka has parked six months’ worth of expenses in a liquid fund as emergency corpus.

Note to readers: The article highlights Sundeep Sikka’s asset allocation and investment strategies. Each individual should tailor investments to their risk appetite and time horizon.

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