A chartered accountant by training and financial expert by profession as well as by choice, Vaibhav Porwal, started dezerv.in along with Sandeep Jethwani and Sahil Contractor nearly a year ago after nearly two decades of working in investment advisory firms at senior positions.
MintGenie caught up with him recently to understand the investment style of the firm co-founded, role of technology in taking investment decisions, and the future potential of cryptocurrencies as an asset class.
First of all, we want to know why is Dezerv an invite-only platform?
We want to understand all our users and their needs before giving any investment advice. Also, the limited number of clients allows us to deliver our best to them.
What role do you think technology plays in investment these days?
We use technology to process data. Then we need human intervention to refine it further. In fact, machine is constrained by several parameters. For instance, if there is a market fall because of Covid-19, then machine would recommend a different strategy, not realising that the fall could be temporary. So, machine can’t identify the nature of loss.
What would you say about the situation of Indian markets as of now, especially after the Ukraine war spooked the markets in India just as in the rest of the world?
There will be an impact in the medium or short term. In the long term, there could be much higher inflation. So, equity — investors can move towards value investing. We believe some of these businesses will do better. In the fixed income, we have reduced the duration of our debt portfolio to guard against the risk of interest rate increase.
For a layperson, what you recommend — investing in passive funds or active funds?
Depends on the segment of the market you want to invest in. If you want to invest in pure large caps — top 100 stocks, then we should go for passive investing. And when you want to invest in the stocks beyond top 100, then you can go for actively-managed funds.
We recommend a mix of both - actively managed and passive managed funds.
In the top 100 stocks, there is little information asymmetry or research arbitrage to capture. They are highly researched stocks, so you don’t get any research advantage.
But when it comes to the below top-100 stocks, you get both research arbitrage as well as liquidity arbitrage, since not many large funds would invest beyond the top 100 stocks.
There is NSE IFSC platform in GIFT City that allows investors to invest in US companies. Do you think this will open investment opportunities for retail investors in India?
Yes, 100 percent. We are at a nascent stage right now. As the market grows, I think, a lot of money will get routed through it.
Technology has become a cornerstone in investment. A range of portals and apps can help investors create portfolio. Do you think with all this happening, conventional investment advisors would soon become a thing of the past?
There are two parts to our service. One is managing market risk, where possibly technology can play a much greater role. But when it comes to managing the emotional risk i.e., managing investors’ biases and their likely behaviour, that’s where human intervention is needed. That role will continue to be there.
What immediate future outlook do you have for Indian markets?
The next two to three months will have some tough time. Because a lot of uncertainty is there both in terms of geopolitical issues and in terms of inflation.
But once we have clarity on that, India will benefit because global investors will have very little to choose besides India. It’s very unlikely that they will look at China’s and Russia’s markets over Indian markets.
However, the market can correct by 10-15 percent anytime, but any correction beyond that looks unlikely at this stage.
Is there anything you want to mention on crypto trading? Do you think they have the potential to become a regulated asset class in the time to come?
The regulators will have to take a call. Till the time, it is not regulated, we would not offer it on the platform.
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As far as their potential is concerned, cryptos has a tremendous amount of potential as long as it operates within a slightly controlled environment, which is contradictory to what these currencies are set out to do — in terms of ensuring the source of money is right, and the utilisation of instrument is right. I think, it has a great potential.
Anything else you want to say about investing habits and mutual funds?
The only thing is to stay invested for a long period of time. Being hyper active in the market has more negatives than positives. Invest from a long-term perspective.
And mutual fund is a great instrument. Consistently, it has created a tremendous amount of wealth for investors over a long period of time. The core part of portfolio should be invested in mutual funds.
Should one go via some investment advisor to invest in a mutual fund?
If you have the requisite skillset, then you can choose the direct plan. But if you need support, it is always better to go through advisor.