"BEST APPROACH IS TO CONTINUE SIPS"

Dhirendra Kumar, CEO, Value Research, on why asset allocation should not be the primary concern of first-time investors

- BY SHAILENDRA BHATNAGAR

DHIRENDRA KUMAR, CEO of Value Research, an online website tracking mutual funds, advocates a patient approach to creating wealth that focuses on the process rather than the outcome. Kumar spoke to BT’s Shailendra Bhatnagar about why staying committed and not letting short-term market movements dictate investment decisions, is the key to long-term wealth management. Edited excerpts:

Are we currently in a bear market?

Market fluctuations are inherent to investing. Most investors tend to chase recent performance, which leads to disappointment, especially for newer participants. Small-cap funds, for example, have declined by 20% over the past three months but are only down 3% over the past year. If you invested three years ago, you’d still be sitting on an annualised return of 16%.

Investing in equities is not like a fixed deposit, yielding 15-20% consistently. Equity markets provide superior long-term returns but with inherent volatility. There will be years of exceptional growth and periods of sharp declines. Unfortunately, short-term investors often react disproportionately to corrections.

While a 15-20% decline in three months is unusual, it is part of market cycles and not necessarily a cause for panic.