'STP': HDFC AMC's Navneet Munot shares 'only' wealth creation formula for youngsters

HDFC AMC MD & CEO Navneet Munot said investors should deploy a large proportion of their money in earning asset classes such as equities or fixed-income funds. "One needs to know that asset classes like gold and Bitcoin don't generate cash flow. Bonds and equities have cash flows because there are underlying companies, running businesses and making profits. So, these asset classes are not comparable. That said, gold has done well for a variety of reasons, whether it's the central banks buying or fear about the Fiat currencies or particularly the excessive debt built by developed countries including the United States. There are periods where it does well then there is an extended period where it doesn't do well and that's why it does not have a cash flow. People should keep it as a hedge, a small portion in gold, but a larger chunk of money should be in equities and fixed-income funds," the market expert told Business Today on Thursday.

Advising youngsters amid the recent sharp correction in domestic benchmarks, the market specialist said, "Start early. Invest regularly and invest in a disciplined fashion. The best part is that youngsters have a positive optimistic view of the economy. They want to take risks and have aspirations. They want to create wealth and know that there is a way to create wealth over the long term. They have a deep sense of curiosity and are not passive investors. They want to remain informed, engaged and enlightened all the time which is a good thing."

In the long run, Munot underscored that there is only one formula for making money that young investors should never forget: 'STP', in which 'S' stands for 'sound' investment, 'T' for long 'time' and 'P' for 'patience'.

"If you don't make a sound investment, give it enough time and don't have the patience, then it's very difficult to make money," the market veteran added.

Munot, while sharing his recent learnings from the stock market, said, "It works like a pendulum. Ultimately, the fundamental prevails as the stock price is nothing but the slave of the earning power of the underlying company. If the prices have run ahead of the fundamentals and narrative prevails, it has to correct and no power on Earth can stop that from happening."

He mentioned that there would be a point where investors need to take a call with conviction that the long-term fundamentals of the country and corporate sector have not changed meaningfully. "We are going through a cyclical correction. At some stage when prices correct and become reasonable, relatively to the long-term prospects, people must come back to the market and take advantage of that. In our industry, we have made it very easy by investing through SIP (systematic investment plan)," he also stated.