Who knew one could cross-link food staples and fund staples to illustrate the need for broad-based funds in one's portfolio? Radhika Gupta, managing director and chief executive officer of Edelweiss Asset Management Co., recommends that such 'dal-chawal' funds need to make up 80% of one's portfolio.
These are "all-weather" funds that can be hybrid, diversified equity funds that may be actively or passively managed, she explained in a post on X, formerly Twitter.
Gupta mentioned a portfolio she came across, that had more than 50% of stocks in narrow sectoral schemes.
Calling this break up "a danger in these times", she highlighted the need to allocate the majority of assets into 'dal-chawal' funds.
What's a dal chawal fund?
Broad based funds that are all weather and span a range of sectors.
Balanced advantage and aggressive hybrid types. Flexi, multi, large and mid, broad based 250-500 index types. Forever funds.
Active or passive doesn't matter - the point is not a… https://t.co/CcwkVJpflxThese can be categories like flexi, multi, large, mid and broad based 250-500 index schemes, she said, calling them "forever funds".
Narrow sectoral funds may perform well during certain cycles, but they have more uncertainty attached when it comes to future growth and returns. "...the point is not a narrow theme based fund that works in one cycle and not in the next," Gupta said.
Gupta went on to call sectoral funds the "flavour of the season". In the long term, a buy and hold approach to sectoral funds will not beat the market, according to her.
Top performers in sectors change during market cycles. Investors need to time their entrance and exit into these narrow funds, Gupta said.
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