Of Lenskart, Mutual Funds, and Investing

Social media has emerged as an undeniable barometer of what’s occupying investor mindspace. Even a cursory participant like me, knows that Lenskart’s Initial Public Offering (IPO) is on everyone’s mind.

A tech-driven new age company, Lenskart is an eyewear retailer. It isn’t uncommon for IPOs of new age companies to be questioned for the robustness of their business models, ability to generate profits, and rationality of valuations. To that end, Lenskart is no different.

Perhaps, what caught everyone’s eye was the magnitude of lofty valuations; also, some comments made by the founder/CEO didn’t sit well with the investor community.

Unsurprisingly, there’s been a barrage of criticism on social media. I have never seen so many memes targeting an IPO 😊

Several leading Indian fund companies have invested in the IPO. Expectedly, they have also taken stick for their decision. Fund companies will have to justify to investors, what drove them to invest in the IPO.

This is where it gets interesting: Some have used the Lenskart IPO to slam the utility of mutual funds as investment vehicles. It has been insinuated that mutual funds are tools for compromising interests of retail investors.

The message is clear: Be way of mutual funds!

To my mind, that line of thought is both fallacious and uniformed.

Mutual funds enable retail investors to access markets, using the portfolio manager’s expertise. Indeed, the onus of selecting an apt fund lies on investors. Beyond that, the portfolio manager and his investment team are ‘first among equals’, while making investment decisions.

Not every stock in the fund portfolio will deliver, or even be apt for every investor in the fund. However, so long as the portfolio helps investors achieve their financial goals (while adhering to their risk profile), it is fine.

Furthermore, when investments fail, it shows in fund performance, opening it to investor scrutiny. Any investor who loses conviction in the portfolio manager and his process, has every right to liquidate his holding and invest elsewhere.

Don’t get me wrong: Indeed, fund companies must be held to the highest standards of probity. Also, Indian fund companies haven’t exactly covered themselves in glory when it comes to acting in investor interest.

Heck, I don’t think anyone has been more critical of the Indian mutual fund ecosystem than me.

However, running down and questioning the very utility of mutual funds as investment avenues because some fund companies invested in a questionable IPO is excessive.

#Lenskart, #IPO, #mutualfunds, #investing

Gold: To Be or Not To Be

For many Indians, this year's Diwali festivities ended a bit abruptly.

Just as they were celebrating their favourite asset class--Gold’s record-breaking performance, out of the blue, gold prices fell sharply.

Indians’ affinity for gold is no secret, thanks to both cultural and religious reasons. Globally, we rank among the largest consumers of gold. To the delight of many, gold has had a dream run over the last year or so. 

The average Gold ETF appreciated by roughly 48% over 1-Yr, versus a 6% gain posted by the typical Large-Cap Fund. As if on cue, gold prices peaked around Diwali, and then came a downturn.

Expert Speak

As gold prices surged over the last year, experts stated that everything from geopolitical tensions, economic uncertainty, inflationary fears, to central bank actions were responsible. And perhaps they indeed were.

Interestingly, not much has changed on ground. Yet gold prices have nose-dived from their peak, and how.

Then again, a year ago, none of the experts decisively predicted that gold would be on a tear, and equities would struggle. Likewise, no one saw the recent downturn either.

Perhaps it isn’t possible to foresee such events, despite what much-vaunted experts would like us to believe. Therein lies a lesson for investors who have a penchant for seeking out 'guru wisdom'.

Basics Are Forever

For retail investors who are trying to figure out 'what's next' on the gold front, the answer (as is often the case), could well lie in the basics of investing.

🟦 To begin with, it makes sense to invest in gold from a diversification perspective. Hence, alongside, asset classes such as equities and fixed income, gold should also find place in your portfolio.

🟦 Next, decide on how much you should allocate to gold. Broadly speaking 5%-10% is deemed a reasonable range. But, investing is a personalised activity. Hence, determine an apt allocation based on your existing portfolio and investment goals.

🟦 Finally, it is likely that recent price changes have resulted in gold occupying a different weight, versus what you have determined as the ideal allocation.

If that is the case, tweak your gold investments to revert to the desired allocation.

Some may point that that this approach is a bit simplistic and basic. Indeed, it is! While investing, keeping things simple, is the key!

Unless you fancy yourself as a commodity trader or guru, you have no business trying to predict the next peak or trough. As an investor, you should be focused on meeting your investment goals rather than predicting the future.

Resist the urge to act on every exciting headline in business dailies and television channels, it will serve you well over the long-haul.

#Gold, #AssetAllocation, #Investing, #Experts