Dhirendra Kumar on Smart Investing Diversification, Asset Allocation & Market Insights

OutlookIndia

#OutlookEvents | At IDFC First Bank presents Outlook Money 40 After 40, Dhirendra Kumar, Founder & CEO, Value Research, emphasizes diversification, asset allocation, and long-term investing as the cornerstones of wealth creation. He also shares insights on market behavior, risk tolerance, and the pitfalls of speculative investments like crypto.  #IDFCFIRSTBank #CelebrateRetirement #OutlookMoney40after40 #OutlookMoney #40After40 #FinancialPlanning

Transcript

00:00There are two, three things to keep in mind. One is to diversification. It is the holy grail.

00:04You can't avoid that. Second is the asset allocation. But don't worry about asset allocation

00:10for the first five years. Why is that? The reason is that asset allocation is like building a shock

00:18absorber. It is building a safety net. And you have nothing to lose in the initial five years.

00:22Yeah, the acceleration is not as much as... You haven't accumulated well enough.

00:27And then you have to figure out that at what stage, as Nilesha was saying, that the doctor

00:33was losing his sleep. And at what stage do you lose your sleep? And it is very difficult

00:39to visualize it till you experience it. As I was telling that you have to lose your own

00:45money. You will not be... Everybody, you know, because I have seen investors' thinking is

00:50very malleable. But is that a good thing? To be malleable for an investor?

00:55It is a very dangerous thing. The reason is that, you know, we change with time. When

01:02you are making money on a day-to-day basis, you have this urgency to borrow money to invest

01:07in the market. Simply because you feel more confident about it. The moment you lose dramatically,

01:14in a brief period of time, you suddenly realize that your risk tolerance is very low. And you

01:21have to really prepare yourself with your groundwork in terms that when investing in equity, it should

01:29definitely be, you know, invested in gradually. Because markets behave, you know, markets turn around

01:35when you least expect it. And you tend to act very aggressively when the market is very inopportune,

01:41you know, configured in a manner where your returns are coming very easily. It is very difficult to

01:48invest money when the market is falling. You know, we are all doing it in self-interest. We are doing it

01:53in self-interest because we don't want to lose money. We don't want to really lose money while the market

01:59is going up. So when we do it in self-interest, it is very counter-intuitive. And the way it works is

02:06that unless you are there for 10, 15 years, at least five years at the least, it's a long-term game.

02:13And initially, if you are able to worry about asset allocation after five years, make sure you are

02:19diversified. And when you invest on your own, when you take an inordinate risk, you better be aware that,

02:26you know, you are implementing these principles yourself. And first and foremost, you know,

02:32the basic principle, which is always true, and it always keeps reminding, you are always reminded of

02:37that, that if something is too good to be true, it won't be. It isn't. And the idea that something

02:47is too good to be true, it isn't. That brings me to this trend that a lot of younger generation is

02:54is not, they are diverting their mind toward mutual funds because they have become aware

03:00of the economy. And it's a good thing. But crypto investing still holds the fancy of many,

03:05many people, especially the younger ones. What would you say to them?

03:08I've been a very, very strong disbeliever of crypto. And I've been wrong.

03:13Oh. And I've been wrong. And I still feel that, you know,

03:17I don't, I'm not embarrassed being wrong. No, but like, did you change your stance?

03:22No, unlikely. You know, I'm old fashioned. So, but I'll tell you why I am wrong. And why I would

03:31like you to take a chance with crypto. And why I will never take the chance.

03:35Why I will never take chances. Okay.

03:37Because as I was telling you that I'm a great believer of, you know, something which is underlying.

03:42Yeah. When you invest in a company, there's a company. Yeah. When you invest in a bond,

03:47when you buy the government bond. Yeah. Or when you, when you lend me the money. Yeah.

03:52It is written there that I owe it to the lender, you know, this much, this much rupee. Crypto is

03:58something which has been invented by somebody. And it is, it is like gold. That it is, you know,

04:04somebody else is willing to pay more money for this. But there isn't an underlying. And you can say

04:10that that is true for gold as well. But gold has a hundred, you know, 1500 year history.

04:15Hmm. And crypto is a new thing.

04:18This hasn't. Then I have two big worries about crypto, which I think, you know, at some point,

04:24hopefully, will come to haunt us. That crypto has turned out to be, you know, if I have to really buy

04:3350,000 rupees worth of mutual fund, the government mandates that I do a KYC. Yeah.

04:39If I have to send you $1 billion worth of crypto, nothing is needed. Yeah.

04:45That's sounds fishy. That sounds, and that is why the drug cartels,

04:49that is their primary mode of transaction. That's one.

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