Parag Parikh, chairman, Parag Parikh Financial Advisory Services, says equities are the best investment.What is your view on the markets?I don't look at the market as a whole. The market for you is represented by
Sensex or Nifty. Sensex is made up of 30 stocks and Nifty of 50 stocks. However, the market has over 7,000 stocks. Is Sensex the right sample to look at?
There are so many stocks outside the indices which are doing well and their price movements are not reflected in the indices. However, the current situation is definitely offering good investment opportunities.
Are you concerned over global economic developments?How can you know
what is going to happen to Greece or not? Or for that matter
Italy or the US. My guess will be as good as yours. I dont know whether the worst is over but I know for sure that certain businesses are available at attractive valuations. I concentrate on what is under my sphere of influence and control.
How have you churned your portfolio in recent times? Churning is for people who invest out of fear and lack conviction. They try to time the markets and make decisions based on day-to-day and minute-to-minute information. I am a value investor. I buy when there are opportunities. My buying and selling decisions are based on whether the business I have invested in has become cheap or expensive.
Do you think it is time to increase cash holdings?It is too late to decide to remain in cash. It is only in good times when stocks are going up and there is excessive greed in the markets that one decides to sell and be in cash so that when the madness ends one has the liquidity to buy stocks. To be in cash would have been a decision to be made well before the meltdown. Yes, I am in cash, but not as much as I would have wished for.
Which are the sectors that you are bullish on?I dont go for sector investing approach. I am for bottom -up stock-picking. I am not concerned whether the economy or a particular sector is doing well or not. I look for businesses available at attractive valuations.
What are the criteria you adopt to identify good companies from the bad ones?I look at certain characteristics of business such as credible and trustworthy management, predictability and sustainability of a business, businesses having a strong moat around them like a strong brand and a distribution network, uniqueness of a product or a service giving pricing power.
I like businesses which require least amount of capital. From this view point I will not invest in commodity businesses as well as infrastructure. The criteria is very simple: Good businesses available at attractive valuations.
What is your advice for retail investors?Today, everyone is looking at making a fast buck. Retail investors need to understand that there are no short cuts to making money. That stock markets offer you instant quick-rich solutions is an illusion.
You need to invest in good businesses run by credible managements and then have the patience to watch your investments grow. This is the only strategy for retail investors.
Are you diversifying into other asset classes?Yes I do have investments in different asset classes. But I believe that equities are the best form of investments. When you buy equity you buy a part of the business.
Stocks are the best hedge against inflation. In current times investors would do well to keep a large portion of their capital in good equity investments. But the most important thing to remember is to look at the quality of the management in whose company you are investing. It is crucial to invest with managements that have integrity and credibility.
