From 'Nimbu Pani' To 'Narasimha Avatar': Lakshmi Iyer’s Guide To The 'Decadal Journey' Of Investment

Iyer views her professional philosophy as "Go with the Flow," often comparing herself to water that takes the shape of the container, emphasising the importance of direction over rigid planning. Have you seen Vidya Balan's Dirty Picture? Iyer asked. "What works in movies is 'Entertainment, Entertainment, Entertainment', but if you enter the world of investment, what will work is 'Patience, Patience, Patience'. She believes people frequently forget that wealth creation is a decadal journey, not a process measured in months, weeks, or even a few years.

Just as a plant needs nurturing, water, and sunshine to grow into a tree, investments require time and attention. She highlighted that while many mutual fund schemes have outperformed benchmarks like those of Warren Buffett over 20 or 30 years, few investors remain invested for the full duration.

This lack of persistence is often rooted in the modern desire for instant gratification, fueled by comparison with social media metrics like likes, which provides a dopamine rush. This craving for quick results is detrimental to a sound financial journey. Ultimately, investors must look within themselves to determine if they are giving their investments the necessary time.

Debt: The All-Seasons Footwear

Iyer criticised the common practice of viewing mutual funds solely through the lens of equity, arguing that debt has a very significant role. She compared debt to lemonade, describing it as an asset class that provides stability and can be held in all seasons, acting as all-seasons footwear. Unlike equity, debt offers categories that allow investment for as short as one day (overnight) or as long as 10 years, yielding a rate of return, though she clarifies it is not interest.

She contrasted this with equity, which serves as the "caffeine" or "energizer" for a portfolio, necessary for growth. While equity data suggests doubling capital over an average period of five to seven years, debt's primary role is to provide a stability factor and should house emergency or contingency funds.

The Vishnu Avatar and the Cinderella Treatment of Assets

Iyer referenced Gold as Vishnu and fixed income as Cinderella. With the recent surge in Gold prices, she described it as taking the Narasimha avatar, or fierce form of Vishnu. She attributed this surge to increased investment demand and global central banks purchasing gold due to diminishing trust in printed currency. However, she cautioned that this explosive return won't last eternally. Gold should be maintained primarily as the balancing factor in a portfolio, suggesting an allocation of 10 to 15%.

Regarding fixed income, she noted that the asset class receives "step-treatment" from investors and media, much like Cinderella from her stepmother. This happens because traditional investments like Fixed Deposits (FDs) still hold a strong magnetic pull for many investors. Addressing current rate cuts, Iyer confirmed the inverse relationship that generally, rate cuts lead to higher returns in fixed income.

From 'Intermission' to 'Digical' Investment

Iyer said that India is currently in the intermission stage of transforming savers into investors, akin to a caterpillar becoming a butterfly. She emphasised that this shift is non-negotiable for financial well-being as it is like needing oxygen.

For those starting their journey, she advised beginning today, asserting that time in the market is far more effective than timing the market. While do-it-yourself (DIY) investment is possible for the financially savvy, the majority of the country is not, meaning they should seek professional advice without embarrassment. She strongly argued that advisors, who provide customised butler service,must be paid, challenging the mentality of expecting free advice ("muft ka chandan ghis mere nandan").

Looking ahead, Iyer defined the ideal path as "Digical," which means a Digital enabler with a Physical overlay. She noted that technological advancements, much like the Mumbai Coastal Road, have dramatically enhanced access and convenience, particularly in areas like customer onboarding in the alternates space. The ecosystem requires collaboration, not competition.. She also referenced the movie Teri Baaton Mein Aisa Uljha Jiya to describe how technology development is creating realities where a robot looks like a human, which we must embrace.

The Excitement of Alternates

Iyer's move to head the Alternates space was driven by her desire to pursue new challenges. She sees Alternates as a "newer animal" or a "toddler" compared to the "adulthood" of the Mutual Fund industry. She estimates the Alternates industry is today where mutual funds were 10-15 years ago. Due to its smaller base, the category is showing significant potential for tectonic growth (20-30% CAGR), offering investors the flexibility to mix public, private, equity, and fixed income assets.

She clarified that products like Private Equity, which deals with unlisted companies, involve higher risk but also hold higher return potential, comparing it to the adrenaline rush of bungee jumping.

Finally, she imparted the wisdom learned from her parents which is to never spend more than you earn. She warned against borrowing excessively, especially without understanding the high interest costs, calling this lack of discipline a sign that "wisdom vanishes when doom approaches".