Young investors need to learn from this market veteran on how to earn superior risk-adjusted returns!

Young investors need to learn from this market veteran on how to earn superior risk-adjusted returns!

by 5paisa Research Team Last Updated: Jan 31, 2022, 03:35 PM IST

Devina Mehra is an IIM-A gold medalist, had an illustrious career at Citibank for seven years followed by co-founding (with her husband Shankar Sharma) India’s leading institutional brokerage firm First Global in the first phase in the 90s. In the next phase it became global (being the first Asian member of the London Stock Exchange outside Japan) and over time has also evolved as an asset management service.

First Global today boasts of a pedigree of 30+ in investing business given the expertise and experience Mehra brings to the table.

 Devina Mehra has always been ahead of her time, a strong proponent of Artificial Intelligence (AI) and Machine Learning as the new age toolset to augment the human analytical powers to generate “alpha”. She opines, that investing in today’s world of overflood of data needs AI intervention vis-a-vis earlier times where the differentiator was information edge.

So, what are a few basic investment mantras by Mehra that a young investor should take a cue from?

  • Diversification is the key to generating positive risk-adjusted returns. Her advice is to take a large number of smaller bets rather than taking a small number of larger bets.

  • Diversification should not be misconstrued as a large number of stocks (from the few select sectors), rather it should be done across sectors, geographies and currencies. Mehra states that “If you are not diversifying your investments globally, you will suffer SCCARS (Single Country, Single Currency, Single Asset Risks).

  • Avoid recency bias i.e. the themes/sectors that appear as the hot/next big thing are actually well past their high and are in the down cycle when they are buzzing.

  • The IPO frenzy should be avoided, should constitute a small amount of money and small attention of your total portfolio. Avoid FOMO at all costs.

  • The so-called “New Age" tech companies which are cash burning machines with exorbitant prices are in essence “Platform Businesses” that are playing the "Brand” cards, according to Mehra should be invested in with caution

  • The Gen-Z fad “Cryptocurrencies” are highly volatile stocks, are on their way to becoming an asset class, but should constitute a small portion of an investors portfolio.

  • Finally, investing is not all about higher returns but earning higher risk-adjusted returns. Risk should be construed as an integral part of investing and is achieved through systematic risk measures, position sizing and taking note of the correlation among various asset classes.

SENSEX
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320.55 (0.59%)
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SENSEX
54,646.94
320.55 (0.59%)
Nifty 50
16,308.80
42.65 (0.26%)
Nifty Bank
34,570.25
293.85 (0.86%)

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