00:00 My name is Ramesh Biswas, I'm from Bangalore. I started my own firm in the year 2013, it's
00:06 almost 20 years now. So prior to that, I worked in few corporate and there's almost 20 years
00:12 of experience in the MFP business.
00:15 Nice to meet you. And I hope you're having a nice day wherever you are based.
00:19 I'm based in Bangalore.
00:20 Okay, fabulous. So like I said, the whole idea of this conversation is going to be about
00:25 mutual funds. And my first question to you is, what is your definition of a strategic
00:29 multi-asset allocation mix when it comes to mutual funds?
00:33 Okay, multi-asset allocation fund is a mix of diversification with enhanced risk and
00:40 return potential. And asset allocation is critical for the wealth creation for the investors.
00:48 So it's very important that the investors invest in a certain asset class which can
00:54 give them a maximum return. So in case of asset allocation, each asset allocation will
01:01 behave in a different manner over a period of different economical cycle. So choosing
01:08 asset allocation is the best for the investor to, is a better option. So in case of asset
01:14 allocation, for my definition would be, this asset allocation will be investing in equity,
01:19 debt, gold and real estate investment just. Okay. So equity actually will aim to provide
01:28 capital appreciation, debt will aim to provide stability in the portfolio. And gold will
01:34 naturally edge against the inflation and the currency risk. So other things, since it's
01:39 managed by mutual fund, the professional manager will look at all this combination, all the
01:44 three, four combination, whichever is attractive, different market condition, they'll be investing
01:49 different asset classes. A professional manager will definitely look at the deep valuation of
01:55 the stock market and explore the equity explosion and reduce the equity exposure when the market
02:00 is very volatile. Okay. So you've actually given me the points for the next two questions that I
02:05 had in mind. One is you mentioned about gold. Now it has been noticed that traditionally
02:09 Indian investors are inclined towards gold. Now, exactly how can this asset be a good hedge
02:15 against inflation, like you mentioned, and what factors make it a safer bet when it comes to
02:20 situations when the market is experiencing high volatility?
02:26 See, if you look at the basic idea for the asset allocation to benefit the investors,
02:30 in a matter of investor, no matter how the economic situation is, so they will have to
02:38 choose this kind of fund so that the risk in their investment will mitigate, it will reduce
02:45 the risk and give them the maximum return. So gold actually will work against, it will
02:51 edge against the inflation. And it will also edge against the currency depreciation.
02:58 Okay. Fair enough. Gold is one way to hedge against inflation, but like you also mentioned,
03:03 having a multi-asset allocation also is another safe weather, fair weather against inflation.
03:10 Can you also explain, elaborate on exactly how that happens when you have a multi-asset
03:16 allocation and how such a strategy helps in long-term wealth creation?
03:21 So Indian actually consider gold as a safe investment bet because they feel always that
03:26 gold is a safe investment and they would be investing more into that. They also feel that
03:30 it will get against inflation and the market volatility. So gold actually historically
03:39 has shown a positive correlation with rising prices. It is appreciated well when real estate,
03:45 when real rate of return is low. During the time of turmoil, the inflation at zero purchasing
03:52 power of currency, the gold is appreciated in value. Okay. If you look at the, during the
03:57 market downturn, the gold price movement has shown a low correlation with the other financial assets
04:02 like stock market and bonds. During the period of high inflation, gold performance can provide
04:09 a counterbalance, helping to reduce the losses. Gold is a global acceptance metal. It attracts
04:19 global investors and even during market turbulence, economic instability and geopolitical tension.
04:27 So that is why if you notice, FIs increase the gold purchase when the market is very volatile
04:34 and keep investing in a gold to edge against the other related turbulence in the market.
04:41 Okay. You're absolutely right about it. But if you come to Indian investors,
04:45 one thing that is observed is gold also has a cyclical demand and decline. So
04:52 what are some factors that investors should keep in mind when they're planning to invest in gold,
04:58 especially looking at the seasonal movements that take place?
05:02 You see, the one disadvantage in the gold is, gold, it cannot be ignored. That is a certain
05:09 limitation in the gold. Like gold cannot be, it cannot generate a cash or it cannot generate a
05:15 dividend, a cash flow regularly. Okay. But during the high inflation time, the global meltdown in
05:25 the equity market. So people will generally choose to invest in gold. And if you also look at it,
05:32 historical data shows since 1971, the price of gold has increased by a competent annual rate
05:38 of return at 7.65%. That is from 1971 till date, it's given a return of 7.65%. That shows
05:45 some time gold can beat the inflation. And that is where the Indian investor choose to invest
05:51 more money into gold. Okay. And they look at it as a multi-asset strategy to invest more into gold.
05:57 So looking at a multi-asset strategy, according to you, what is your advice? What is a component
06:03 that gold should have in that allocation? Generally, what these fund managers are doing is
06:07 they look at the market condition. Suppose, look at the market today, it's at 66,500 level. And
06:15 gold would be about say, per ounce is about 1,900 per dollar per ounce. So they will be
06:24 looking at this kind of market combination to look at gold as asset class to edge against the
06:31 one is the volatility, the other is an inflation. And normally during period like this, the
06:36 asset allocation towards the gold, the fund manager will be increasing somewhere around
06:41 35 to 40% and keep equities as asset class between 20, 25% and the balance into debt to provide
06:49 stability in the portfolio. Okay, fair enough. And you mentioned one very interesting point,
06:53 which is about gold and how it is a safe harbor when it comes to geopolitical issues,
06:58 which we have seen in the past several months. So how exactly can it help investors in protecting
07:06 the portfolio from global risk? And today, it's not just limited to global, global risks are not
07:12 limited only to geopolitical issues, it also spills over to climate change, and the various
07:17 calamities that is routed by climate change. How can gold be a hedging instrument against it?
07:25 See, normally, when it comes in the form of gold, when people are investing, they look at one as a
07:30 safe bet, because gold, they feel that it will not be related like equity market. And whenever
07:36 there's a turbulence or global market uncertainty, investors tend to increase the exposure towards
07:43 gold and reduce the equity exposure, so that it can edge against the inflation, or even if it is
07:51 a market turmoil, we continuously downward. They feel, we also tell investors to expose more into
07:58 gold or a multi asset funds, so that they can protect their principal and reduce exposure
08:06 into equities. So Mr. Biswas, those were the only questions that I had. Is there anything else that
08:11 you would like to tell investors when it comes to factoring in gold in their monthly asset allocation
08:17 or their multi asset strategy? Yeah, if you look at traditionally, Indians,
08:23 their favorite is one of the asset is gold. So gold should be part of their asset allocation.
08:29 And you look at any one of us today, we have gold as asset allocation, real estate as asset
08:36 allocation, equity as an asset allocation and the mutual fund as asset allocation. So combination of
08:42 all these four factors, it will definitely help investors to create wealth and to protect again,
08:48 against the inflation or a currency depreciation. One should have exposure into gold so that
08:53 the portfolio asset allocation will grow in such a way that irrespective of whatever is the market
08:59 condition, they will be making a close to double digit return or sometimes even 10 to 11% kind of
09:06 annualized return. Thank you so much for your time Mr. Biswas.
09:09 - Thank you. - Thank you.
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