In April 2020, when covid hit India and the country went into lockdown, Mint spoke to industry leaders in the financial services space to understand the impact of the pandemic on their personal investment portfolios. With the passage of a year, we are going back to our respondents to see how things have panned out and whether there are any lessons for investors. In the fourth part of the series, we talk to Kalpen Parekh, president, DSP Investment Managers Pvt. Ltd.
Parekh had a balanced portfolio when the pandemic hit in April 2020. It was 44% in equities (12% in international equities), 41% in debt, 9% in gold and the rest in real estate and alternative asset classes.
The current portfolio has 51% in equities (10% in international equities), 42% in debt and 7% in gold.
The higher share of equities stems from a rally in the stock markets over the past year, but Parekh recently booked some profits and moved a small amount into debt. His international equity allocation is through DSP feeder funds investing in gold mining stocks, natural resources stocks and value companies.
Parekh says he started investing in gold for the first time in 2018 and now has 7% of his portfolio exposed to the precious metal directly and indirectly—5% is through mutual funds and 2% via sovereign gold bonds.
Parekh invests in gold tactically; he cut his exposure in September 2020 and is looking to get back in. “The DSP World Gold Fund acts as an aggressive proxy to gold. I had reduced weights here in the middle of last year when gold was rising. I shifted to our funds that invest in energy and metal stocks to increase weights to the very beaten down commodity space as companies were at a decade-low valuations and prices and so were the underlying commodities,” he said. “I may add more gold now as prices have corrected a lot in the last six months.”
Parekh has 42% of his portfolio in debt. “My approach to choosing debt funds is active bond funds when rates are high (8-9%) and the DSP Short-Term Fund when rates are lower than 8%,” he said.
According to Parekh, there is no perfect asset allocation. “Each individual’s asset allocation is unique to his near-term cash flow needs (buying a home, in my case) and investment ideology (increase risk when asset classes are lower; almost everything is peaking today),” he said.
“All my investments are in mutual funds. I don’t invest in stocks as I firmly believe this is the most efficient investment vehicle that combines long-term compounding, liquidity and effective taxation in one single instrument,” he said.
All his investments were made in DSP funds since the time he joined the fund house. “This is almost 75% of my entire investments now,” he said.
“My broad belief for asset allocation is 75% in equities (India and international combined), 15% in debt and 10% in gold. However, equities are currently at 51% due to expensive valuations and my likely need for a home purchase (if I get lucky),” added Parekh.