Which assets should retail investors bet on according to their risk appetite?

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Which assets should retail investors bet on according to their risk appetite?


Aggressive Investors

Equity (70%)

Value Funds (25%)

Why invest: Growth has outperformed value over the last 10 years and looks expensive. Investors should prefer value over growth. Allocate to midcaps/small caps and opt for special situations and thematic funds

Products and Past 3/5 year returns: UTI Value Opportunities (9.27/11.96), ICICI Prudential Value Discovery (6.53/9.99), Invesco Contra (8.72/15.7)

Smallcaps (20%)

Why invest: As economic growth comes in, the undervalued small-cap segment could outperform the broader markets. Small-cap segment is under-researched, giving fund managers the opportunity to generate alpha

Products and Past 3/5 year returns: Axis Small Cap (11.47/15.42), Kotak Small Cap (6.63/14.44), Union Small Cap (2.6/8.8)

Thematic (10%)

Why invest: There are thematic opportunities where investors could take tactical bets

Products and Past 3/5 year returns: DSP Natural Resources and New Energy (0.36/16.14), ICICI Prudential India Opportunities Fund (NA), Edelweiss US Technology FoF (NA)

International (15%)

Why invest: With India accounting for just 3% of global market capitalisation, it is time to build a global portfolio

Products and Past 3/5 year returns: Motilal Nasdaq 100 (NA), Edelweiss Greater China (24.68/23.26), PGIM Global Equity Opportunities (32.71/21.89), Invesco Consumer Trends (NA)

Gold (10%)

Why invest: Gold will preserve purchasing power in a negative interest rate environment

Products and Past 3/5 year returns: Nippon Goldbees (18.3/13.57) Liquid (5%)

Debt (20%)

Why invest: Invest in short term instruments with maturity of 91 days

Products and Past 3/5 year returns: Aditya Birla SL Liquid (6.22/6.64), Kotak Liquid (6.04/6.49), ICICI Liquid (6.17/6.57 Medium Term/ Credit Risk (15%)

Medium Term/ Credit Risk (15%)

Why invest: With the economy improving these funds enable you to capture the spread between AAA and lower papers

Products and Past 3/5 year returns: Axis Strategic Bond (8.78/9.41), ICICI Prudential Credit Risk (9.42/9.32), HDFC Medium Term (9.08/9.09), SBI Credit Risk (8.2/8.73)

Moderate Investors

Equity (50%)

Index Funds (20%)

Why invest: Large companies have improved profit margins during the pandemic and gained market share

Products and Past 3/5 year returns: UTI Nifty (10.95/13.7), UTI Nifty Next 50 (NA)

Asset Allocation Funds (10%)

Why invest: Asset allocation funds help you reduce/increase allocation to equities in line with market valuations

Products and Past 3/5 year returns: Aditya Birla SL BAF (9.07/11.4), ICICI Prudential BAF (8.97/11.25), Edelweiss BAF (11.87/11.74)

Midcaps (5%)

Why invest: As economic performance catches up and rally gets broad based, midcaps could outperform large caps

Products and Past 3/5 year returns: Mirae Asset Midcap (NA), Axis Midcap (14.54/16.59), Kotak Emerging Equity (96.65/14.61)

Thematic (15%)

Why invest: Structural growth story plus global diversification. Domestic PSU funds a value play

Products and Past 3/5 year returns: Invesco Consumer Trends (NA), Motilal Nasdaq 100 (NA), ABSL PSU Equity Fund (NA

Debt (40%)

Post Office Deposits (10%)

Why invest: 5-year post office time deposit pays 6.7%, which is much higher than that paid by nationalised banks

Products and Past 3/5 year returns: 5-year post office deposit (6.7%)

NCDs (10%)

Why invest: NCDs of AAA/AA rated companies from secondary markets

Products and Past 3/5 year returns: Tata Capital, L&T Finance, Shriram Transport could yield 6-9%

Low Duration Funds (10%)

Why invest: These will give liquidity as well as generate higher than liquid funds. Debt funds give you indexation benefits

Products and Past 3/5 year returns: HDFC Low Duration (8.19/8.22), Kotak Low Duration (8.65/8.74), Aditya Birla SL Low Duration (8.57/8.48)

REIT (5%)

Why invest: International REIT could help you earn higher than deposits over a 5 year time frame.

Products and Past 3/5 year returns: Kotak International REIT (NA)

Credit Risk Funds (5%)

Why invest: As the economy improves lower rated paper can generate higher returns

Products and Past 3/5 year returns: ICICI Prudential Credit Risk (9.42/9.32), SBI Credit Risk (8.2/8.73)

Gold (10%)

Why invest: Portfolio can be split between gold ETFs that give you liquidity and Sovereign Gold Bonds (SGBs), where there is no expense ratio and interest is 2.5%. SGBs are tax-free on maturity.

Products and Past 3/5 year returns: Nippon Goldbees (18.3/13.57) and Sovereign Gold Bond

Conservative Investors

Equity (35%)

Index Funds (10%)

Why invest: Index funds are low cost and do not have any fund manager bias

Products and Past 3/5 year returns: UTI Nifty (10.95/13.7), UTI Nifty Next 50 (NA)

Equity and Bond Funds (10%)

Why invest: Hybrid funds invest in a mix of debt and large-cap stocks

Products and Past 3/5 year returns: Canara Robeco Equity Hybrid (11.91/13.25), Mirae Asset Hybrid (10.49/14.34), SBI

Equity Hybrid (9.39/12.23)

International Funds (5%)

Why invest: International funds help diversify portfolios geographically

Products and Past 3/5 year returns: Franklin India Feeder US Equities (28.71/20.22), PGIM India Global Equity Opportunities (32.71/21.89)

Balanced Advantage Funds (10%)

Why invest: These funds lower equity allocation when markets move up and vice-versa

Products and Past 3/5 year returns: DSP Dynamic Asset Allocation (9.98/10.42), IDFC Dynamic (8.99/10.01)

Debt (55%)

Ultra Short Term Funds (5%)

Why invest: These funds help you meet liquidity needs and will help you earn 3-4%

Products and Past 3/5 year returns: Axis Ultra Short Term (NA), SBI Ultra Short (7.4/7.33)

Dynamic Bond (10%)

Why invest: Medium-term funds that have a mix of AA and AAA rated paper have the potential to yield higher returns

Products and Past 3/5 year returns: ICICI Prudential All Seasons (10.09 /10.69), IDFC Dynamic (11/10.24)

Post Office Deposits (20%)

Why invest: 5-year post office time deposit pays 6.7%, while Kisan Vikas Patra pays 6.9%. which is much higher than that paid by nationalised banks

Products and Past 3/5 year returns: 5 year Post office deposit (6.7), Kisan Vikas Patra (6.9)

RBI Savings Bonds (10%)

Why invest: GOI bonds will pay 35 basis points higher than post offi ce NSC

Products and Past 3/5 year returns: RBI Floating Rate Savings Bond (7.15)

Gold (10%)

Why invest: Sovereign gold bonds have zero expense ratio, pay interest of 2.5% and are tax-free on maturity. Government issues are announced in advance every six months

Products and Past 3/5 year returns: Sovereign Gold Bonds





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