Ravi Kumar Jha, managing director and CEO, LIC Mutual Fund, shared invaluable insights into successful investing at Outlook Money’s 40After40 Retirement Expo. He underlined discipline, duration, diversification, and diligence as the four key components of a successful investment strategy.
Read more: https://www.outlookmoney.com/retirement/news/outlook-money-40after40-follow-4ds-of-discipline-duration-diversification-and-diligence-says-rk-jha-of-lic-mutual-fund
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Read more: https://www.outlookmoney.com/retirement/news/outlook-money-40after40-follow-4ds-of-discipline-duration-diversification-and-diligence-says-rk-jha-of-lic-mutual-fund
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LearningTranscript
00:00Thank you so much for joining us so I think in order to discuss how to become a successful
00:08investor we have to discuss a very very viral concept which is popular getting very popular
00:15these days which is the concept of SIP short for systematic investment plan so do you think
00:23SIPs truly are the mantra for successful investing first of all a very good evening to all the audience
00:31and the participants in this hall and I welcome on behalf of LIC mutual fund also all of you and
00:38express my sincere thanks to Outlook money and the entire team for inviting me personally
00:42coming to success story of SIP I need not to highlight because it is it is already highlighted
00:50in the media and if you will see the journey from December 2016 December 2016 the SIP monthly
00:59SIP pipeline was around 4000 crores and just over a period of eight years to December 2024
01:07the SIP amount has risen to more than 26459 crores with a CAGR of 26.75 percent so this
01:16is one data which is extremely important and very vital secondly if you'll ask me about
01:21the SIP AUM so there also I'll tell you in March 2023 it was around 6.83 lakhs and December
01:3024 if you'll say it's almost around 13 crores 13 lakh crores of amount and which comes to 20
01:38percent of the total AUM of the industry also so and it has more than doubled just in a period
01:45of less than two years so as regards SIP people have understood the citizens of India has understood
01:54the Millennials the Zenzi they have understood very clearly the benefit of SIP how how they
02:02are going to benefit from the power of compounding etc and there has been a lot of trust and and and
02:08the popularity of the SIP because of this but success does not I'll say success does not in encompass only
02:19SIP there are other other products also in the market like LIC policies like NPS or bank FDs also so
02:27there are other segments of financial savings which which can also be taken as part of success story
02:35because we must have a holistic outlook of the entire success journey and and finally
02:42the real success I will say especially in investment is about investment about patience
02:49and due diligence because unless we have patience unless we have discipline
02:54if we are not investing into that then we will be losing the benefit of the wealth creation which is
03:03very very important so any investment we have to do the real success will come only when we will have
03:10patience due discipline and and a zeal to ensure that we have a wealth kitty over a period of time very
03:18rightly said sir and you have quoted so much data that speaks for the popularity of SIP itself but
03:23say recently SIPs have do come under a lot of fire why do you think that is so see with the popularity of
03:30anything it's traditionally also at our home also in society also if someone some person will become very
03:39popular there will be naturally a lot of jealousy and envy cause of envy also so likewise similar is the
03:46story of SIP why I am telling you this because if all of you may remember around two years back even
03:54Mercedes CEO he also said that people are preferring SIP rather than taking Mercedes-Benz car and currently
04:02if you will see banks have raised a point a point that their CASA ratio is going down because people are
04:10investing into mutual funds and particularly SIP now now friends I'll tell you investors have a right to
04:19invest in any place and particularly CASA if you will tell me CASA is a very low cost deposit of the banks
04:29with minimal interest rate of around two percent two point seven percent two point seven five percent
04:34or at the most three percent and therefore people or the citizens or the millennials and Z they always
04:42explore good investment avenues and naturally equity market stock market mutual fund SIP will always
04:50be a flavor of taste for for each one of them to invest and get more and more returns for their money
04:58so this is one segment which I wanted to tell you there is another segment which I want to highlight all
05:03of you that we in mutual fund we face everybody all of you appreciate and you may be seeing that mutual fund
05:14every month is picking a new height but there is a second aspect that many people also terminate their SIP
05:21or they stop their SIP and in this market downturn also many people may have might be doing that
05:29either they would have achieved their financial goals or because they might have got emotional they
05:35they may be seeing the returns in a negative territory segment they may be doing it in fact I'll tell
05:41you in April to in March 2023 there were 8.39 crore of SIP numbers and in the last year in in this
05:51financial year April say December to around 5.4 crore new SIP has taken place but the the stoppages
05:59or the termination of SIP is almost 3.46 crores which is 41 percent of that 8.39 crores so though SIP
06:07numbers have grown to more than 10.32 crores but it is also a fact that good number of investors are
06:16stopping stoppaging or stopping their SIP or terminating their SIP for their own specific reasons
06:25what I want to emphasize that if the market is going down we should not get jittery or emotional rather
06:34that is the time that we should invest more into our SIP lump sum etc so that we can take benefit of
06:41the rupee cost averaging rupee cost averaging is a marvelous concept that at lower prices
06:51it gives higher number of units in that particular folio in that particular account and that gives lot of
06:58push to to the build up of the compounding the power of compounding of SIP and and that power of
07:05compounding of SIP grew in lips and bounds if you don't time the market we we should be disciplined
07:14and keep on investing regularly in SIP as an RDA account etc so that we are able to get full benefit of
07:21the SIP and that is the most important thing this is what the second thing which I wanted to highlight
07:26I wanted to request all the investors through this medium that they should not stop their SIP pause
07:33their SIP rather they should this is the time that they should they should invest more they should go
07:39for a step up SIP they should go for topping up their SIP so that the ultimate benefit the wealth creation
07:46can be more pronounced and more strong than what it is you are right sir discontinuation perhaps there are
07:53many reasons attached to it and lack of awareness or understanding could be one of those and along
07:59those lines there are over 2000 mutual funds currently in the market and those are too many options for a
08:05retail investor so how do you think one can make the right choice given there are so many options
08:10layered up ahead of them see coming to the right choice it's it's not an easy answer it's a difficult
08:17answer because there are more than 1500 or as madam very rightly said around 2000 SIP schemes but if you
08:25take an advisor with you the task becomes very easy this is what I'll suggest first and foremost to all the
08:32investors particularly especially the newer ones they want to start their investment journey if they can take
08:41the support of the mutual fund distributor or an advisor that will be wonderful because that advisor will
08:49have a wealth of experience of 10 15 20 years and he can guide beautifully in taking up the SIP where to
08:56invest what to invest all these things will be taken care of that particular person so this is one thing
09:02which is extremely important and this I would like to highlight second thing is that once I have selected an
09:10advisor and I am going with him I must determine my needs, what is my needs, what is my financial goals, whether I want to
09:19purchase a house whether I want to as rightly the theme of this this event is 40 after 40 so whether I want to
09:30make planning for my retirement so there are different financial goals that can that an individual can select
09:37for himself so it's extremely important so it's extremely important that the determination of the needs
09:42determination of the financial goals are extremely important and the next point is time horizon what
09:49is the time horizon for which I want to invest I got short term duration then debt funds will be ideal or
09:57otherwise if a person wants to invest that financial goal financial planning is for a longer period of time
10:033 years 5 years 10 years then naturally equity can be the flavor of the selection that that person can
10:13opt for and then finally if he selects that equity is one of his choice product he wants to invest and
10:19that is the report which comes from Amphi also we see that almost 81 percent more than 81 percent of the
10:28people's choice is equity only so if equity is the choice then they have to decide whether they want
10:33to go for large cap mid cap or small cap large cap will give moderate returns with lot of stability
10:41mid and small cap can give high growth but there can be volatility so a longer term there in the mid cap
10:48and small cap segment will naturally give lot of uh success to that person in creation of the wealth kitty
10:55which he has planned for himself so so my request will be these three four things which i said that
11:02an advisor either a parent father mother who knows about the financial investing if they are not aware
11:10then the advisor the mutual fund distributor is should be the right person to guide him then he should
11:16have his financial goals his needs the duration cons asset linear diversification of assets these are i think
11:23the success mantras for investing successfully in mutual funds absolutely sir but this one thing
11:31that we must also discuss here you have mentioned key if we are confused perhaps the best strategy would
11:37be to go to a financial advisor and unfortunately or fortunately i don't know uh we have a lot of
11:44advisors influencers as we call them on social media gen z perhaps uh get way more influenced by them
11:51perhaps not a seasoned investor but new investors may get so what is your advice for them how to steer
11:56away from these kind of advisories one has to carefully select the advisor what kind of advisor either your
12:04parent family members or from your office where you are working from your circle of colleagues that you
12:10are having you should find out if somebody is there somebody is having already having an advisor and who has
12:17been a trusted advisor for five ten twenty years lic agent or a mutual fund distributor who is also doing
12:24the job of mutual fund so and and people will give in india to suggestion dene ki kami nahi
12:30i mean here you can be very rightly said you have a suggestion you have a suggestion or not even
12:35asking thousand suggestions suggestions so why don't we do this like this if we have to invest our
12:41money then it's very important that we are able to do this right to make an advisor and mutual fund distributor
12:47So all these things can be, all these resources can be tapped to opt for the best advisor.
13:06Thank you for that sir.
13:08Now we'll move on to something which is also very important and an old saying will summarize
13:13that we should never put all our fruits in one basket.
13:16So there are so many options and there are too many ways to invest.
13:20How should one approach asset allocation when they are thinking SIP?
13:24So coming to, I'll take the example of sports or cricket only.
13:29Cricket if you will see a team, a country or a team will always have good batsman, good
13:34baller, good wicket keeper, all rounders.
13:38So a mix of everything will be there so that a balanced team is there, a team which is very
13:44much balanced and who can win matches for the country.
13:48Likewise, similarly investment also in financial world also, it's very, very important to have
13:53a diversified asset allocation.
13:56It should be in equity, debt, gold, silver, etc.
14:00So that a person can get best of the returns at all times.
14:03Because it is not possible that all the segments will fire up at one go.
14:10One year equity will be very good, next year debt can be very good, third year gold can
14:14be very good.
14:15So likewise there will be turn by turn.
14:17Some will be doing well, some will not be doing well, but it's very simple to say that one
14:24must do asset allocation, diversified asset allocation, but it's a very complex job because
14:31the market realities are complex and proper professional guidance is very rare to come.
14:39So therefore my suggestion will be that in like in a LIC mutual fund, we have a multi asset
14:44allocation fund, there are some other AMCs who are having multi asset allocation fund,
14:49there are professional fund managers who are doing this on behalf of the investors.
14:54So one need not to worry about asset allocation or one need not worry about how to go about
15:03in selecting different and what components should be there.
15:06One should simply try to invest in those funds.
15:11multi asset allocation fund or hybrid funds, hybrid funds are also there wherein equity
15:16and debt component are there.
15:18So there will be always a mix of these products which are available readily in the market.
15:22And there are professional fund managers in every AMC who are doing this job excellently
15:28with good returns, good healthy balance returns.
15:31And so people, if they will be investing that they will be making a lot of money and a lot
15:35of good wealth creation for themselves and for their families.
15:40Absolutely, sir.
15:41So talking about good and bad investment, how do you think, is there a magic figure that defines
15:47that it will be best?
15:50There is no magic figure for returns, I'll say.
15:55But like we have undertaken study in our own AMC, we find that on an average, if one is remaining
16:03invested into equity funds, he will be getting a CAGR of compounded annual growth rate of 12
16:10to 14 percent, 15 percent.
16:11That is the rate that he or she will be getting.
16:15So, my suggestion will be, there are four Ds, one is discipline, anushasana, investment
16:22, second is duration, third is diversification, you diversify different assets so that you are
16:34always above the curve.
16:37And finally patience, diligence should be kept.
16:41If we are keeping these four things in our mind, I think the magic returns, the magic of power
16:50of compounding will definitely accrue in their folios, whether it is SIP, lump sum, whatever.