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Radhika Gupta’s investment advice: Emphasize ‘Dal-Chawal’ funds

investment advice by Radhika Gupta

Edelweiss MD and CEO Radhika Gupta recently took to social media to provide guidance on safe mutual fund investments. In a series of posts on X (formerly Twitter), Gupta advised followers to ensure that “80 percent” of their investment portfolios consist of what she terms “dal-chawal funds.”

Gupta shared an example of an investor with a ₹27,000 monthly SIP spread across 31 funds, 15 of which were narrow sectoral funds. She warned that this approach is risky, especially in uncertain times. “A danger in these times is to fill your portfolio with narrow ideas that ideally are satellite allocation. Remember, 80% of the portfolio should be ‘dal-chawal’ funds!” she emphasized.

What are ‘Dal-chawal’ funds?

When asked to clarify what constitutes ‘dal-chawal’ funds, Gupta explained that these are broad-based, all-weather funds that are not limited to narrow themes. She highlighted hybrid funds, diversified equity funds, and broad-based index funds as examples. Specifically, Gupta pointed to balanced advantage, aggressive hybrid funds, flexi-cap, multi-cap, large and mid-cap funds, and broad-based 250-500 index funds as suitable ‘forever funds’. “Active or passive doesn’t matter — the point is not a narrow theme-based fund that works in one cycle and not in the next,” she added.

Why this strategy is important

Gupta underscored the importance of broad-based funds for their stability across market cycles, reducing the risk associated with over-allocation in specific sectors. She likened this strategy to the old adage of not putting all your eggs in one basket. A diversified portfolio ensures that one’s investments balance each other out during periods of gains and losses.

In another series of posts on X, Gupta discussed sector rotation, noting that while sector funds are currently popular, they typically yield returns in line with the broader market and rarely outperform it. She explained that although sector funds can exhibit cycles offering potential alpha if timed correctly, predicting these cycles is challenging. She cited examples of recent counterintuitive market behaviors, such as tech performing well during recessionary COVID-19 times and banks underperforming when rates rose.

Overall, Gupta’s advice stresses the value of diversification and caution against over-reliance on narrow sector funds.

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