Shankar Sharma, the founder of GQuant Investech and a market veteran, is of the view that retail investors should keep revisiting asset allocation and should not be over-exposed to equities as it is a difficult place to make money.
"For investors, again, I keep going back to asset allocation. Do not get too exposed to equities. Despite all the last three years’ euphoria around it, equities are a difficult place to make money and take it from me. I have done this for a very long time," Sharma said in an interview with ET Now.
Sharma underscored equity is a highly volatile space so it is extremely risky for retail investors.
"I hope and pray that, unlike the West, we do not become a country with 60 percent, or 70 percent equity ownership. That would be disastrous because the volatility of equities is high. We know that. That directly affects consumption in the western world. We do not want that happening in India," said Sharma.
He said retail investors should limit their exposure to equities and take the help of fund managers.
"On your 20 percent, 30 percent equity exposure, which is the highest I would recommend, for an average person on the street, I do not think there is any other option but to go to a fund manager and give you money," Sharma said.
Sharma said even though there are periods in which making money is easy but for a larger period, there may be problematic periods when nothing happens or bad things happen and we may be in such a period now.
"We are in a period where maybe nothing happens, which is substantial, in which case your fixed income part really helps you out. It is not an enemy, it is your friend and treats it as such. Give it due respect," Sharma said.
Sharma advises one should utilise this period and instead of despairing, be positive.
"You will find fantastic bargains, and build another portfolio, portfolio-2, which will help you through the next one year, at least as it has helped me," he said.
Other than equities, investors can invest in gold, real estate and fixed income, Sharma said.
"Gold has been fantastic in the last six, eight months' time and that again is going to give prop up consumption. Real estate has been very strong. Fixed income numbers are very good. Do not become equity centric so much that this volatility kills you," said Sharma.
Sharma is highly optimistic about the smallcap space as he believes there are many opportunities in this space.
"The opportunities still lie in the smallcap space. I am a big votary of that space. I continue to remain hugely optimistic and bullish on the outcome and outlook for smallcaps," Sharma said.
"There is a number of good companies with very reasonable valuations, and they have not fallen much in this correction also. This tells us that the tape is very favourable to smallcaps," said Sharma.
Sharma advises investors should work hard in this market which will give them healthy returns in the next one year.
"Work hard in this bear market. Spend time, if you are a self-directed investor, run screeners, look at good quality companies in this phase, and build a 25-stock portfolio. You will be laughing all the way to the bank, hopefully, a solvent bank, in the next 12 months’ time," Sharma told ET Now.
Disclaimer: This article is based on an ET Now interview. The views and recommendations given in this article are those of the expert. These do not represent the views of MintGenie.