Tuesday, November 21, 2006

Adopting lifecycle approach to investing

"Indians are not really in love with passively managed investments - in this case, index funds." She might come across as just another tourist from the West trying to catch a glimpse of Kolkata as the winter months set in. Talk to her some more, and you might get an idea of how the Indian stock market could fare vis-à-vis the rest of Asia or how the pension reforms should go forward.

Ms Michala Marcussen, a first-time visitor to the city, is no stranger to the market. As Head of Strategy and Economic Research at Societe Generale Asset Management (SGAM), she knows how Indian stocks have fared of late compared to those in other emerging markets. Her Paris-headquartered organisation runs an India fund (and a China fund as well) and has a joint venture with the fund management company promoted by SBI.

SGAM is actually quite aware of the current state of the Sensex - the fact that it did cross 13,500 points, that stocks have been getting more fairly valued and that the good ones might still be worth buying if an investor is willing to stay committed for 3-5 years.

Higher valuations or otherwise, Ms Marcussen has a word or two to offer to young Indian investors. "There is merit in adopting what is often called a `lifecycle approach.' If you are a young investor, you could consider greater allocation to equities, which might perhaps come down in favour of fixed-income securities as you grow older." SGAM has been advocating this in France and elsewhere.

Indians, she says, are not really in love with passively managed investments - in this case, index funds. The latter are often seen as the classic second choice, actively managed funds being the first. Also, certain basic investment strategies (for instance, those focused on absolute returns) are likely to win the average investor's vote in this country, she adds.

Much could change when financial sector reforms are carried forward. That could, in turn, mean a lot for SGAM, which, like so many others of its ilk, is rooting for changes in pensions regulations. The Parliament has to take the final call on this, she says.

Story credit goes to The Hindu Business Line
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