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If investors stop SIPs when the market falls, it is a failure: S Naren of ICICI Pru MF

'Invest when GDP growth is very low and take it out when it is very high is a simple way to invest. However, the problem now is that markets are not that cheap, which makes it a challenge.'

ET Bureau|
Nov 25, 2019, 10.05 AM IST
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Invest when GDP growth is very low and take it out when it is very high is a simple way to invest. However, the problem now is that markets are not that cheap, which makes it a challenge, said S Naren, CIO, ICICI Prudential AMC in an interview to Pankaj Poddar of ET Now. Edited excerpts:

When you look at just the SIP flows do you get a sense that equity as an asset class is now preferred via mutual funds as against earlier?
The mutual fund industry was always very investment oriented and in my opinion exit loads and other things that were there also contributed to the fact that you could not trade mutual funds, you had to invest in them and also thanks to various things that the regulator did then for the industry. The entire IFA and wealth management community also managed to create a habit of saving through SIP. This is one of the most extraordinarily good decisions that have happened to the investor and to the mutual fund industry. But you have to remember that they cannot give up if the market falls. The day people close SIPs when the market falls, then it is a failure and that is something I am going to watch.

When we look at the GDP numbers, when we look at most of the news coming around in terms of defaults or big companies not being able to pay, news is bad but markets are at all-time high. What do you make of this situation?
If I had to look at one simple way to invest it is investing when GDP is very low. So if you go back to 2002, GDP was doing very badly and in 2007 GDP was doing very well. So invest when GDP growth is very low and take out money when GDP growth is very high is a simple way to invest. Right now the problem is that GDP growth is low but market valuation is not as cheap as 2002 or 2008 post Lehman. So that is a challenge, that is why I would say that today value stocks seem to reflect their GDP growth and in my opinion if you invest when GDP growth is low, you will normally make money. This time you cannot do it in everything, you can still do it in value. I think one of the things people forget is that equity is an asset class to be invested when times are bad and to be taken out when times are good . The challenge for people when investing is how do you invest when times are bad and how do you take out money when times are good.

If any investor is starting now or trying to make an asset allocation, what are the basic things that one should always keep in mind?
I will say that the most important is saving. Today one of the worries I have is that too many people are actually taking loans on the basis of future income and I would say that in a country like India it is important that you have to save. The second is choose an SIP in any fund which they want and then start with that process. That is why I would say that anyone should start at this point of time and I would say that if there is an asset class which becomes very cheap, they should gather the guts to buy that asset class those are the things which I look at.

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