Funds ka Funda: How New-Age Investors Can Build Wealth Without Losing Perspective

Vidhi Mehta: Hello everyone and welcome to Funds ka Funda.

Today, we are joined by Srinivas Khanolkar, Head of Digital Business, Marketing and Corporate Communication at Mirae Asset Investment Managers. With over 20 years of experience in financial services and investor engagement, he brings deep insight into smart investing and market behaviour.

Hi Shrini, welcome to the show.

How New-Gen Investors Are Approaching Markets Differently

Vidhi Mehta: We are seeing a generation today that wants to travel, try out new restaurants, attend concerts, and build a life around experiences. At the same time, they also want to build long-term wealth.

That may sound familiar, but it feels much louder and clearer today. Gen Z investors are not just digitally savvy, they are also much more comfortable taking financial decisions early in life.

I was looking at a BCG report recently, and it said that one in four young people is already earning and investing. For them, investing in mutual funds feels normal. At the same time, many of them also want to try higher-risk products like F&O or crypto. They want to see how quickly they can build wealth, maybe even retire early.

So, my first question is this: what is this generation doing differently from previous generations, and what are the hidden risks or blind spots that could hurt them in the long run?

Srinivas Khanolkar: Thank you, Vidhi, for inviting me.

We have spoken a lot about Gen Z but wait till Gen Alpha and Gen Beta step into investing. What we are seeing with Gen Z is only the beginning.

This generation has grown up watching their parents, but they have also had constant exposure to information through digital media, social platforms, and everything that happened during and after Covid. Today, you do not even need a circle around you to get information. In many cases, short-form content and online platforms can give you more insight than what traditional institutions may have offered earlier.

If you look at Gen Alpha, they are growing up in a world where an overseas holiday every year may feel normal. Their outlook on life will be even more different, and perhaps their appetite for risk could be two or three times that of Gen Z.

Coming back to Gen Z, I think one reason they are drawn to risky products is that they have mainly seen one-sided bull runs. If you had asked the same question a year ago, the answers would probably have been different. Today, after seeing moves in gold, silver and other assets, their preferences may already be shifting.

What I like about this generation is that if something genuinely connects with them, they go very deep into it. But if it does not, they disconnect quickly and move on.

They are also early adopters. If they see a trend moving fast, they are more likely to act on it earlier than millennials or previous generations, who may be a little more cautious because they have already seen cycles where momentum did not last.

The blind spot, in my view, is the tendency to go from zero to one hundred.

That extreme behaviour can hurt them. We have seen it during geopolitical tensions or during sharp commodity moves, such as the recent silver rally. Rather than being fully in or fully out, investors usually do better when they spread out risk.

If you talk to people who have genuinely created wealth over time, they rarely go to extremes. They usually invest in more structural stories and diversify their exposure instead of simply chasing momentum.

Building the Right Foundation Before Chasing Returns

Vidhi Mehta:Investor mindset is one part of the story, but for anyone who has just started earning, building a financial base is equally important.

So, if someone is in the first one or two years of their earning life, what are the three or four things they should start with before they begin actively chasing returns?

Srinivas Khanolkar:That is a very important question.

There is a common belief that if you just start an SIP, everything is sorted. I would say SIPs are important not only because they invest your money, but because they build the discipline of saving.

If you leave it open-ended, either everything gets invested impulsively or nothing gets invested at all. SIPs help you create the initial base on which future decisions can be taken.

So, the first step is simple. Pick one broad-based product, maybe an index product, an ETF, or a flexi cap fund, and just begin an SIP.

The second thing to remember is that age is on your side.

Once you have spent a year or two understanding how markets actually behave, then you can start exploring slightly riskier products. If things go wrong, you still have time to recover.

Many millennials started taking meaningful small-cap exposure only in their forties. Younger investors can learn from that and begin taking measured risk earlier, because once responsibilities increase, you may still want to be adventurous, but something will hold you back.

If you are young and your responsibilities are limited, you can afford to take some extra risk, but cap it. Say 25% to 30% of the portfolio. Do not go all in.

Should New Investors Start with Term Insurance and Mediclaim?

Vidhi Mehta: While SIPs are important, what about basics like term insurance and health insurance? If someone is 22 or 23, should they start with these first so that the foundation is secure, or can they do both simultaneously?

Srinivas Khanolkar: Let me make one assumption while answering this.

Suppose we are talking about a 25-year-old earning around ₹40,000 to ₹50,000 a month. In that case, the cost of a term plan would still be very manageable. The premium might be around ₹10,000 a year, perhaps even less, depending on the cover.

That means even after taking a term plan, the person still has enough room to start an SIP and also contribute towards medical insurance, especially if they want to cover their parents.

So yes, term insurance is necessary and should be one of the first things to secure, particularly if your income matters to the family. But that does not mean you postpone investing. Both should go hand in hand.

And as your income rises, both need to be reviewed. Increase your SIP, increase your cover, and reassess once life events such as marriage or children happen.

What Should Investors Do During a Market Crash?

Vidhi Mehta: Let us say someone has been investing through SIPs for one or two years and then suddenly witnesses a market crash like 2008 or 2020. Their mind says continue because they are a long-term investor, but their heart says stop.

What should an investor do in such a situation?

Srinivas Khanolkar: The first thing to understand is that SIP works because it removes the need to decide on the day.

If the choice was left to you each month, there would be many days when you would hesitate, wait, or skip. And then the market might rebound the very next day. That is why rules-based discipline works so well.

Now, when there is a sudden crash caused by something outside your control, the important question is whether it is actually in your control or not.

I have personally seen 2008 unfold while I was in a new job. I had made the mistake of chasing momentum then. There were certain stocks doing very well, so I went after them. Then one Monday we came to office and discovered that something called Lehman Brothers had collapsed, and I could not understand why an event in the US had affected me personally.

That was also around the time I was getting married, so I understand what concentration risk feels like.

Looking back, the only thing in my control was whether I had become greedy in chasing momentum. If I had been more cautious, it would have helped.

But 2020 was different. Nobody could control that. Markets fell before most people could even process what was happening, and before they fully understood the scale of it, markets had recovered.

Those who stayed invested in 2020 and did not panic ended up making very good returns in the years that followed.

So, when markets correct sharply, one useful thing to do is look at history. How many times has the market corrected by more than 20%? How often has it fallen by 30%, 40% or 50%? A 50% fall has happened only a handful of times across many decades.

Then you realise that such moments are rare opportunities. They may not come back often in your investing life.

So doing nothing is also a strategy. Continuing your investment is also a strategy.

If you have already chosen equity as an asset class, you have already accepted some degree of risk. The real problem arises only when you need money at a specific time.

This is where many investors make a mistake. Suppose you invested ₹100 with a goal of seeing it become ₹200 or ₹300 over 10 to 12 years. If that target gets achieved in the seventh or eighth year, why do you want to be greedy? Why not take that money off the table, at least partly, if the goal has already been met?

Goals give you an exit. Otherwise, there is no clear exit point.

How Should Investors Choose the Right Fund?

Vidhi Mehta: Even when markets are stable, investors often feel confused because there are simply too many choices. Large cap, mid cap, multi cap, different AMCs, different styles.

What are the three or four parameters an investor should look at before choosing a fund?

Srinivas Khanolkar: Think of it like walking into a supermarket. If you do not already know what you want, you will find endless variants in every category.

The same thing happens in investing. Choice will always exist, and from a consumer point of view, choice is good. It allows comparison.

But the investor has to start by filtering.

The first filter is your requirement. What do you want from the product?

If your requirement is stable compounding over a long period, with no major swings, and you are investing with a 15- to 20-year horizon, then maybe a consumption-oriented strategy suits you, because India’s structural story continues to be driven by demographics and consumption.

Once you narrow it down by requirement, then apply other filters such as track record, continuity of fund manager, and fund house quality.

Think of it the same way you think about boarding a flight. Most people are not checking the pilot personally. They trust the system, the regulator and the consistency of the airline.

Similarly, in investing, if returns are not consistent over time, you may choose to avoid that option. But if a product has shown long-term consistency, that gives some comfort.

The key is not to look only at what is trending right now. Something recent may look attractive, but should you put 100% of your money there? Probably not.

Do Young Investors Really Need a Wealth Manager?

Vidhi Mehta: Do you think a 25-year-old investor really needs a wealth manager, or should they start on their own and only consider professional advice once their income rises?

Srinivas Khanolkar: That is an excellent question.

In a bull market, when everything is moving up, people tend to believe they can take all decisions themselves. But remember one thing: when a doctor falls ill, they go to another doctor. They do not operate on themselves.

So yes, it is good to start. But the difference a good distributor or advisor brings is that they show you choices that are not obvious.

Left to yourself, you may only look at the top five or ten products that have already delivered returns. But there may be other products or structures worth considering that you have not even looked at.

If you genuinely have the time, interest and ability to go deep into manager quality, portfolio construction, fund house processes and category behaviour, then by all means do it yourself.

But if this is not your full-time focus, then professional help can be useful even when you are taking baby steps.

And as wealth grows, professional guidance becomes even more important because once wealth is created, protection and diversification start mattering more.

Should a Portfolio Be 100% Equity?

Vidhi Mehta: Post-2020, a lot of people entered equities out of FOMO. Many began to feel that for long-term wealth, 100% equity is the obvious answer.

Is that really a sound strategy?

Srinivas Khanolkar: There is no one-size-fits-all answer.

A 25-year-old may say they have nothing to lose and can go 100% equity. A 60-year-old may say they have just retired but still need growth because they may live another 25 or 30 years.

So, I would not say there is one universal allocation.

But yes, if you are always 100% equity, you will face volatility. The better question is what you can introduce into the portfolio to reduce some part of that risk.

That can happen in two ways. One is by reducing concentration within equity itself — for example, balancing small caps with large caps. The other is by introducing multi-asset exposure, where you get some allocation to debt, gold, silver or bonds.

As your corpus grows, the need to diversify becomes more important.

Can Emergency Funds, Insurance and Term Cover Justify 100% Equity?

Vidhi Mehta: Suppose someone has already built an emergency fund, has adequate mediclaim for self and family, and also has a term plan. Can that justify a 100% equity allocation?

Srinivas Khanolkar: Again, it depends on where you stand.

Because if you look at the household holistically, there is often already some debt or fixed-income allocation built in — money in savings accounts, fixed deposits and so on.

So, if the overall household allocation is balanced and rainy-day needs are covered elsewhere, then a high equity allocation within the investment portfolio may still make sense.

But if literally everything is going into equity, then the emergency component should sit in safer categories such as liquid funds, overnight funds or other short-duration options.

Which Macro Events Should Investors React To?

Vidhi Mehta: Markets are constantly reacting to rate cuts, tariffs, geopolitical issues and all kinds of global developments.

Which of these events should actually make an investor relook at their portfolio, and which events should they simply ignore and continue investing through?

Srinivas Khanolkar: Let us first divide life into what is in your control and what is not.

How much you earn  partially in your control.
How much you save in your control.
How much you invest  in your control.
How much debt you take on  in your control.

But what social media says tomorrow, what geopolitical event erupts next, or what some macro narrative becomes fashionable — none of that is in your control.

If you focus only on what is in your control, 90% of the job gets done.

People worry a lot about the rate of return, but even that is not entirely in your control. Markets will move, governments will change policies, interest rates will change.

What is in your control is how much principal you put in and how much time you give it. If you stay invested for longer, compounding takes over.

There are enough studies showing that on a long horizon, static asset allocation often outperforms dynamic switching.

In fact, behavioural studies show that investors usually hold equity investments for only about 3 to 3.6 years on average, while balanced investments are held for longer. And balanced portfolios often end up delivering better outcomes over long periods.

That tells you something important: if the portfolio is more balanced in nature, investors tend to stay invested longer, and that itself improves outcomes.

Understanding Rupee Cost Averaging and SIP Discipline

Vidhi Mehta: Whenever we talk about SIP, we also talk about rupee cost averaging. Can you explain in simple terms how it works and how it connects to the power of compounding?

Srinivas Khanolkar: Let me explain the behavioural part first.

Suppose you make two lump sum investments. One was made three years ago and has delivered 20%, while another made more recently has delivered 60%.

What happens is that you get fixated on individual reference points. You start believing fund B is better than fund A, even though fund A’s 20% may actually be a very strong compounded return over three years.

With SIPs, you break that fixation. You are not looking at one entry price. You are looking at total money invested versus total value created.

That is why SIP works. It removes the single reference point and builds discipline.

As for compounding, the real force of compounding usually becomes very visible only around the 13th or 14th year. Before that, it still feels more like principal plus return. After that, the curve starts to steepen.

The mistake most people make is during market falls. They stop or reduce SIPs. In reality, that may be the time to become more aggressive.

If markets correct 20% and you have the liquidity, can you bring forward six months of SIP instalments and deploy them earlier? If you can do that, the long-term effect on compounding can be substantial.

So, patience matters, but so does being smart when opportunity appears.

Red Flags to Watch Out For While Investing

Vidhi Mehta: What are the warning signs investors should look out for when someone is trying to sell them an investment product?

Srinivas Khanolkar: Whenever someone approaches you with an investment idea, usually one of two things is happening. Either they are genuinely sharing information, or they are pushing something because it has recently done well.

These days, it is actually easier to verify things because you can quickly use AI tools or other search tools to check a few basics.

Ask simple questions:
How long has the fund existed?
Who is managing it?
What is the fund house behind it?
Is it a broad structural category or just a recent sectoral or thematic story?

These basics help you understand whether the idea is driven by recency bias or by something more durable.

I also believe every portfolio should have some room for experimentation, maybe 20%. That is where you try newer ideas.

But the remaining 80% should stay committed to longer-term, more dependable products.

Another practical filter is to look at calendar-year performance. If a fund has a 15- or 18-year track record and has done well in most of those years, that shows a degree of consistency. If it has only done well in a handful of years and underperformed in most others, then you need to question the consistency of the process.

Past performance is not a guarantee, but it does give you a sense of how the fund has behaved across cycles.

A Simple Money Rule Investors Should Remember

Vidhi Mehta: Is there one underrated money rule you would want viewers to remember when it comes to long-term investing?

Srinivas Khanolkar: Yes.

A simple way to think about long-term equity returns is this: GDP growth plus inflation gives you a broad anchor for long-term market return expectations.

So, if GDP growth is around 7% and inflation is around 4%, then 11% is a reasonable broad-market expectation. Add a little from earnings growth and you may get to 12% or 13%.

If your portfolio is doing better than that over a cycle, you are ahead. If it is behind, then over time it may catch up.

There is a similar way to think about debt returns too — risk-free rate plus time premium gives you a base return expectation, and anything much above that usually comes from taking additional credit risk.

If you understand this simple maths, it becomes easier to know what a realistic expectation looks like, and where you stand in the cycle.

Conclusion

Vidhi Mehta: Thank you, Shini, for joining us and sharing such valuable insights.

And to everyone watching, before we wrap up, here is a question to think about:

Twenty-five years from now, what is the one financial decision you want to be thankful you made?

Let us know in the comments.

Disclaimer: Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.