Radhika Gupta has 17% of her portfolio abroad. Here’s how much she wants Indians to invest globally
The Edelweiss Mutual Fund chief has 17% of her own portfolio invested abroad and would prefer to raise it to 20%. For most Indians, however, she recommends a 10-15% global allocation but only after building the portfolio’s basic “dal-chawal” of domestic equity and debt. Global diversification, in her framework, is necessary, but it should be the fourth component of the investment thaali, not the first.
Edited excerpts from a chat:
You’ve often compared asset allocation with the Indian ‘thaali’. Within that, where does global diversification fit?
Radhika Gupta: When I came back to India and started investing around 2011, the first thing I did, — apart from buying local mutual funds; I wasn’t even in the industry or at Edelweiss yet — was look for an international fund. At the time there were maybe four international funds available, and I bought the Aditya Birla Sun Life International Equity Fund. That’s how strongly I believe in global diversification.
Once you’ve covered the basics — once there’s ‘dal-chawal’, the staple, in your stomach — then international exposure becomes a necessary part of your thaali. But if you haven’t made your first investment yet, that first investment should be in Indian equities, because if anything goes wrong in India, at least you understand it. Once you’ve covered the basics, though, the thaali needs an international component.Why? A few reasons. It’s not an anti-patriotic stance — one, different markets do well at different times.
Second, many listed companies simply aren’t present in India. Entire sectors aren’t present here and I don’t just mean semiconductors. Streaming isn’t really here. Deep pharma research isn’t here. We’re still an evolving economy. And third, currency. I think international exposure should be 10-15% of your portfolio — it’s 17% of mine. I wish it were 20%, but the regulatory limits don’t allow it.
So global diversification definitely isn’t your “dal-chawal” for beginners?
Radhika Gupta: No — the first three components of your thaali should be equity and debt, which is your basic dal-chawal. After that, if you want, you can hold 10-15% in gold and silver as a hedge — that’s your third component. The fourth should be international assets.
So international is fourth on your list but a lot of people are now advocating, without saying it directly, that it should actually be the first.
Radhika Gupta: I think that’s recency bias. I’ll give you the argument for making it first: India is only about 4% of the world economy, so why wouldn’t you diversify more broadly? But my argument against making it first is that to understand equity, you should start with your home market. I’ve seen this when selling international funds — we also run a China fund — and when something goes wrong in China, people don’t understand what’s happening there and get frustrated. With your own market, you understand it. So my reasoning is fairly basic.
When I lived in the US, I started by investing there and only diversified beyond it later — because that was my home market; I lived and worked there, and understood what was going on. When you don’t understand something, you get confused. So start with your home market.
If you were allocating fresh capital today, how would you spread it across asset classes, especially with gold not doing well?
Radhika Gupta: I’ll tell you how I think about my own portfolio. Within equity, I’m about 60-70% mid and smallcap, so effectively multi-cap in nature — that’s how I’d build an equity portfolio. Instead of pure fixed income, I always keep some hybrid-oriented funds — multi-asset or aggressive hybrid — which also gives some gold and silver exposure. I don’t see gold and silver as wealth-creation asset classes; I look at their two-year returns, do SIPs into them, and keep them at around 10% of the portfolio without swaying much either way. I still hold US and China exposure, essentially US and emerging markets, and I’ve also increased my allocation to our newly launched SIFs.
Let’s say an investor wants to start a new SIP of ₹20,000 a month. How would you advise them on which categories to invest in?
Radhika Gupta: I like the basic categories. You can look at flexicap — though sometimes flexicap skews too largecap-heavy, so flexi or multicap. Or you can build largecap, midcap, and smallcap individually — whether through a single fund or separate components doesn’t really matter; these are all basic “dal-chawal” categories. Medium-risk investors can look happily at hybrid categories. I still think balanced advantage funds are a very good category, even if no one writes articles about them anymore. Multi-asset is still a decent category too, though people went overboard with it because of gold and silver. So hybrid categories remain useful — investors should use them well.
For asset allocation, 50% in Indian equities is a good starting point. Then 10-15% in fixed income or hybrid funds — you need some safety asset class. 10% in gold. And 10-15% in international assets. These allocations can move up or down depending on circumstances.
