One of the most common mistakes of new-age investors is a lack of discipline, says Neil Bahal, Founder & CEO, Negen Capital.
In an interview with MintGenie, Bahal said that asset allocation depends on the income and expense profile of investors.
Q. What is the first advice you give to your clients while giving them portfolio management services?
The first thing is to manage expectations. The most important advice to investors is to come in with a long-term view because while India is a great long-term story, there will always be ups and downs in the stock market.
Q. How do you advise your clients on rebalancing a well-diversified portfolio?
Rebalancing an equity portfolio is not as easy as it looks. The biggest mistake new investors make is that they sell profit-making positions immediately and hold loss-making investments forever. It should ideally be the opposite.
I believe that investors should look at their portfolio as a mini-ETF and whenever they do a systematic investment plan (SIP), they should buy the whole portfolio on a pro-rata basis and not just pick whatever has gone down the most.
Q. Many people are not able to balance the risk versus reward component while deciding their investments. How do you advise on the right asset allocation then?
Asset allocation depends on the income and expense profile of investors. The answer would be very much tailor-made for everyone. But, overall, it's always much safer to have diversification in your asset mix. Always best to have a financial advisor guiding you with various options.
Q. Do you advocate the active or passive asset allocation strategy?
For full-time investors, it's straightforward, active is the answer. But for individuals who cannot devote time, it's better to go for passive products.
Q. What common mistakes do you think new-age investors make while deciding on their choice of investments?
One of the most common mistakes from new-age investors is a lack of discipline. Many people have a huge allocation to cryptocurrency, for example, which isn't right. Of course, discipline comes with experience and age. Everyone goes through their learning curve.
Q. What are the common mistakes made while rejigging investment portfolios in sync with market changes?
A lot of rejigging is done in a panicked state of mind, that's the biggest mistake. A bear market sees outflows and a bull market sees inflows. Again, it should be the other way around.
Q. The market is currently offering a “buy on dips” opportunity. Which market cap do you think investors must focus on and why?
Again, a different approach will work for different profiles of investors. For someone like me, for example, I would make a diversified stocks portfolio basket with a multi-cap approach + regular SIP at a portfolio level.