According to Rahul Jain, President & Head – Wealth Management at Nuvama, direct stock-picking is not the answer for most investors looking to diversify globally. He believes passive strategies and fund of funds can offer a more effective way to gain exposure to different geographies while reducing the burden of taking individual country and stock calls. Jain recommends that investors look at international equities as part of their overall equity allocation rather than treating them as a completely separate asset class.
For international equity investing, Jain suggests an 85:15 split between domestic and international equities within the equity portfolio. He recommends starting with equity at 40% in total, 50-55% debt, and 5% gold in the equity portfolio. Over the next 12-18 months, he feels equity might be volatile, with opportunities to increase the 40% allocation to 50-55% where debt can be converted to equity. The international equities should be part of the equity portfolio rather than a separate segregation, as the risks are similar while returns can be different.
Jain advocates for fund of funds as the preferred approach for international investing, stating that direct stocks are not the answer whether in India or outside. He cites multiple ETF options available including emerging markets, US tech, whole US markets, developed countries, and China. According to Jain, fund of funds makes the most sense because it provides complete global exposure while reducing undue risk. The fewer calls investors take on their own and let fund managers handle them, the better it is for reducing complexity and headache.
With global markets being driven by multiple factors including AI and technology, changing interest-rate cycles, and geopolitical developments, predicting which geography or theme will outperform can be extremely difficult. Jain notes that prediction is difficult in equities with many moving parts simultaneously affecting markets. He emphasizes that taking stock calls requires significant research and expertise, with chances being less in terms of generating returns for most investors.
According to Jain, AI will give significant power to investment consumers by clearly telling them whether their portfolio is working or not working. He notes that AI adoption is happening with clients using it to understand which advisor is creating real value for them. For wealth managers, AI will help them understand client portfolios better in real time, reducing the arbitrage of knowledge between experienced and junior bankers. Jain emphasizes that rebalancing should be done every 12 months, with portfolio reviews conducted every 6 months to build client comfort with rebalancing.
