Q: Many investors chase returns. Why should goal-based investing be the starting point while building a portfolio?
Chirag Muni: Goal-based investing is the first step of any investment journey. Unless you have a goal, you cannot build a strategy or decide how to implement it. It’s like playing a cricket match without a target, you won’t know the required run rate or approach.
When you define a goal—the amount you need and the year by which you need it—you can work backwards. That helps decide where to invest, how much risk to take, and how compounding can work in your favour based on the time available.
For instance, if an investor does a monthly SIP of ₹25,000 for 15 years assuming a 12% return, the corpus can grow to around ₹1.18 crore. Extend the same SIP to 20 years, and the corpus becomes nearly ₹2.29 crore. With a 25-year horizon, it can reach ₹4.25 crore. Time in the market makes a dramatic difference.
AgenciesDisclaimer: Images generated using artificial intelligence for illustrative purposes only.
Q: Once the goal is clear, how should an investor create a strategy?
Chirag Muni: After setting a goal, the next step is deciding the right asset classes. In India, broadly, investors can choose from four asset classes – equity, debt, gold and real estate.
A practical long-term strategy largely revolves around financial assets, specifically equity and debt, because they are relatively non-correlated and easier to manage. With the right mix, they help build a stable portfolio.I am not a strong proponent of residential real estate as an investment. After auditing nearly 13,000 real estate portfolios, we found average long-term returns of 8–9%, while the Nifty delivered 12–13% over the same period. Real estate also requires heavy capital and lacks liquidity.
Gold often attracts investors due to recency bias, but long-term rolling returns tell a different story. Since 2012, gold has delivered around 8.56% annualised returns over three-year rolling periods, compared with 12.5% for the Nifty. Silver has done even worse at around 6–6.5%. On a risk-adjusted basis too, equity scores better, with Sharpe ratios above one.
Gold should be used as a debt substitute, not an equity alternative.
Q: How should investors decide the right allocation between equity and debt?
Chirag Muni: Time horizon is critical.
- Less than 1 year: 100% debt — there’s no room for risk
- 1–3 years: Around 50–60% equity, balance in debt
- More than 5 years: Up to 70–80% equity and 20% debt
With a diversified equity-heavy portfolio and a longer horizon, a 12% return expectation is reasonable.
AgenciesDisclaimer: Images generated using artificial intelligence for illustrative purposes only.
Q: Investors often focus only on returns. What should they prioritise instead while designing portfolios?
Chirag Muni: The biggest mistake investors make is falling prey to recency bias — assuming what has done well recently will continue to perform.
Asset classes and even mutual fund categories are cyclical. Five years ago, small-cap funds were underperforming; recently, they moved to the top quartile before correcting again. Similarly, some mid-cap funds that were top performers in 2021 are now laggards.
Within equity, diversification across market caps is essential. A balanced allocation could be:
- 50–55% large-cap
- 25% mid-cap
- 25% small-cap
This structure helps manage cycles and volatility over time.
AgenciesDisclaimer: Images generated using artificial intelligence for illustrative purposes only.
Q: What is your view on thematic and sectoral funds?
Chirag Muni: Thematic and sectoral funds are easy to enter but extremely difficult to exit. Investors usually enter based on trends — defence during geopolitical tensions or pharma during COVID — but timing the exit is tricky.
Instead, diversified categories such as flexi-cap, multi-cap, and large & mid-cap funds are more suitable. These allow fund managers — who track sectors daily — to adjust allocations dynamically.
When selecting funds, investors should look at:
- Fund manager’s track record
- Stability of the fund house
- Scheme size
- Portfolio allocation and risk behaviour
Basic due diligence is essential.
Q: What mistakes do investors commonly make during volatile markets?
Chirag Muni:
The biggest mistake is losing patience.
Investors tend to panic during sharp corrections and sell at the bottom. On the other hand, during flat markets, they feel disappointed and believe they would have been better off in fixed deposits.
Another common mistake is not reviewing and rebalancing portfolios periodically. Portfolios should be reviewed every 6–12 months.
Chasing the sentiment of any trending asset, whether crypto or gold, is another pitfall. Markets will always present distractions. Sticking to the original strategy and continuing investments during corrections often delivers better outcomes.
Q: Is a ₹1 crore retirement corpus still sufficient today?
Chirag Muni: ₹1 crore may sound like a large number, but it’s meaningless without factoring in inflation and expenses.
For example, if monthly expenses are ₹50,000 today, in 15 years they could rise to ₹1.5-1.6 lakh assuming 6-7% inflation. That changes the required retirement corpus significantly.
AgenciesDisclaimer: Images generated using artificial intelligence for illustrative purposes only.
In today’s terms, a ₹1 crore corpus may actually need to be closer to ₹3.5-3.6 crore in 15 years. Investors must work backwards based on real expenses, not headline inflation numbers.
Q: SIPs are gaining popularity. How should investors use them effectively?
Chirag Muni: SIPs are the most effective way to invest — for both retail investors and HNIs. They enforce discipline and automatically manage market volatility.
One powerful but underused feature is annual SIP step-up.
For example:
- A ₹25,000 monthly SIP for 20 years at 12% grows to around ₹2 crore
- With a 10% annual step-up, the same ₹2 crore can be achieved in 15 years
- Continue the stepped-up SIP for 20 years, and the corpus can reach nearly ₹4 crore
Stepping up SIPs as income rises can significantly accelerate wealth creation.
Q: During market corrections, should investors invest lump sum or continue SIPs?
Chirag Muni: Based on a 24-year study, SIPs delivered better average entry points than lump-sum investments 80% of the time, even when investors tried to time the market over six months or one year.
During volatility, investors should assess whether the bad news is domestic or global. If global factors are driving the correction while domestic fundamentals remain strong, it often presents a good opportunity.
SIPs should never be stopped during volatility. If income permits, investors should actually increase contributions.
Q: One simple strategy for investors entering 2026?
Chirag Muni: Start SIPs, step them up every year, and maintain a long-term asset allocation of 70–80% equity and 20% debt. Stay disciplined and avoid reacting to short-term noise.