SIP for life: A Balasubramanian's investing mantra for people entering job market

Amid a steep selloff in the broader market, A Balasubramanian, MD and CEO of Aditya Birla Sun Life AMC said the recent wave of large equity issuances, both in the primary market and through promoter and private-equity offer-for-sale transactions, has come at a cost.

Supply never stops, he said citing his recent conversation with a busy merchant banker, who helps companies raise capital. But the demand is limited, Balasubramanian added citing a lack of FPI participation.  

Balasubramanian believes earnings growth would soon revive and that it is a good time for people entering jobs market to fixate on Systematic Investment Plans (SIP) in mutual funds for life.

In an interview to Business Today, Balasubramanian said FPI participation has largely been absent, and although insurance companies and the New Pension System (NPS) are investing actively, overall supply in the market has continued to rise.

The number of issues coming in is far higher than what the market could absorb, he said.

"Because the supply is increasing and the demand can come only at the cost of either from selling something to buy something, that is what I believe is the circle we are in," Balasubramanian said.

Balasubramanian said the active investor participation or domestic financial savings coming mainly through mutual funds is a long-term money, it bodes well for the market. 

"While one may absorb using this money available for the increased supply of issuance in the market, but as the earnings starts coming in the next three-four quarters, you will also see corresponding rise on the stock price," he said.

Balasubramanian believes it is right time to start investing in the market, given aspirations for India to grow at 7-8 per cent on the GDP level; 10-12 per cent on a nominal basis, and that India is marching towards the $10 trillion mark. 

The MD and CEO of Aditya Birla Sun Life AMC suggests for SIP for life.  He said the truth is expenses never stop, but one day income will. 

Balasubramanian said when one starts investing at the age of 30, one needs to assume that he will work at least minimum of 20 years, if not full 30 years, up to the age of 60.

"That means, they can not only plan for creating a wealth by way of SIP, they can also actually plan for the retirement by way of SWP. So, this is for the people who are at the age of 30. Even the people who are at the age of 40 or 45 never plan for their various expenditure that they may incur on a month-on-month basis," he said.
He said expenses are not going to come down. Therefore, one would need to create a bit of room for them to build on size and assets and wealth, which ultimately will come in handy to meet the potential expenses that may come as and when either one gives up job or retire.