1 month ago
Debate on Optimal Equity Allocation for Investors
Shankar Sharma, a veteran investor, suggests that people should only invest 5-10% of their money in stocks.
He thinks that stock markets work better in rich countries with good safety nets, not in India.
He also believes that the recent good performance of the stock market is not sustainable.
However, other experts disagree.
They say that how much you should invest in stocks depends on your age, how much money you make, how long you plan to invest, and how much risk you can handle.
They also think that investing regularly in stocks through SIPs is a good way to build wealth over time.
The experts agree that stocks have historically grown faster than inflation, making them a good choice for long-term goals like retirement.
Shankar Sharma recommends keeping no more than 5-10% of disposable net worth in equities.
Experts argue that equity allocation should be based on individual factors such as age, income stability, time horizon, liquidity needs, and risk appetite.
Sharma believes that the surge in retail SIP inflows has become a convenient exit route for foreign portfolio investors.
Experts argue that SIPs are effective for long-term wealth creation and that the issue lies in better suitability assessment and investor education.
Sharma points out that the long-term average return of around 14% a year over three decades is misleading, as most gains came from just two bull runs (2004-07 and 2020-24).
- Who
- Shankar Sharma, Kunal Shah, Mukesh Kumawat
- What
- Debate on the optimal equity allocation for investors
- Where
- India
- When
- Recent interview with Financial Express
- Why
- To determine the appropriate equity allocation for investors based on different perspectives
Shankar Sharma's Perspective
Experts' Perspective
Equity Allocation
Shankar Sharma's Perspective
Shankar Sharma recommends keeping no more than 5-10% of disposable net worth in equities, arguing that equity markets are better suited for richer economies with strong social safety nets, not India.
Experts' Perspective
Experts argue that equity allocation should be based on individual factors such as age, income stability, time horizon, liquidity needs, and risk appetite, rather than a flat percentage.
SIPs and Market Dynamics
Shankar Sharma's Perspective
Sharma believes that the surge in retail SIP inflows has become a convenient exit route for foreign portfolio investors, allowing them to sell into steady domestic buying.
Experts' Perspective
Experts argue that SIPs are effective for long-term wealth creation and that the issue lies in better suitability assessment and investor education, not discarding SIPs or equities.
Equity Market Performance
Shankar Sharma's Perspective
Sharma points out that the long-term average return of around 14% a year over three decades is misleading, as most gains came from just two bull runs (2004-07 and 2020-24).
Experts' Perspective
Experts argue that staying invested through market volatility and corrections is crucial for capturing strong years and achieving long-term wealth creation.
Key facts
- Shankar Sharma's Recommendation
- 5-10% of disposable net worth in equities
- Experts' Recommendation
- Equity allocation based on individual factors such as age, income stability, time horizon, liquidity needs, and risk appetite
- Average Equity Allocation in India
- 5.3% of total household wealth
- Average Retail Inflation in India
- 6%
- Average Return of Nifty 50 since 2012
- 12%
Quotes
Shankar Sharma
Veteran Indian investor and founder of GQuant Investech
“"no more than 5-10% of your disposable net worth"”
financialexpress.com
Sources
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