Alok Jain, founder of Weekend Investing, is a Delhi-based research analyst. Jain runs some popular strategies on Smallcase, a platform allowing individuals to invest in curated portfolios created by Sebi registered research analysts or Sebi registered investment advisors. Mint caught up with Jain to ask him how he invests his own money. Unlike many fund managers, Jain is not heavily tilted towards equity, with just 35% of his personal money in stocks. A large chunk of Jain’s net worth is in real estate and gold (30% each) and he puts the residual amount in debt, more as an emergency provision.
When it comes to equity, Jain invests through momentum strategies. Momentum strategies are investing techniques to buy stocks that are trending upwards and sell stocks that are trending downwards. Typically, they involve complex quantitative analysis. Jain offers these strategies on Smallcase and also follows them in his personal equity investments.
“Regulatory restrictions make it difficult for me to invest through my own smallcase portfolios since I am restricted from transacting in them for a certain number of days before and after they enter the smallcase portfolio,” he said.
A momentum strategy necessarily needs speedy trading and hence the restrictions can prevent him from making returns similar to the model portfolio. However, Jain added he follows similar strategies for his personal investments since they are driven by quantitative models and they have a high level of churn (the entire portfolio is churned around 3 times a year).
This investing style has given him a 40% return in the past year, admittedly a bull market year. However, according to Jain, momentum as a strategy works equally well in bear markets since it is able to move quickly into cash, and limit the extent of losses (drawdowns). This also makes these strategies highly risky. “Most of our strategies are mid and small-cap-based. We dissuade investors from entering them with large amounts (in excess of ₹15-20 lakh). We have also halted flows in some strategies,” he said. When it comes to gold, Jain invests through sovereign gold bonds, gold exchange-traded funds, and physical gold. His gold allocation at 30% is more than most equity fund managers, but it comes from gold’s ability to diversify and its low correlation with equity.
“Even if US dollar investors don’t get that much from diversifying into gold, Indian investors who have a depreciating currency will get these benefits. If you look at examples like Turkey or Russia, a single country and single currency portfolio, even of stocks, can do poorly,” he pointed out. According to Jain, older investors should particularly tilt towards gold because of the ability of the precious metal to preserve wealth. “Age of the investor divided by two is a good thumb rule for people to follow,” he said. Jain has not yet invested in international stocks or mutual funds investing outside India. However, he said that he expects to do so, especially once such portfolios are made available on Smallcase.
Alok Jain is also a real estate investor, though he acknowledges the muted returns that real estate has delivered over the past decade. He invests in commercial real estate, buying and renting out commercial property in Delhi. He also considers his primary residence a part of his investment portfolio. “At the end of the day, it is an asset. If you really need the money you will sell or mortgage it,” he said.