Be patient with investment

Daylynn Pinto is associate director fund management at IDFC Mutual Fund. He entered the mutual fund industry in July 2004 with UTI AMC, where he focused on the transportation and logistics sector. In the years that he served at the firm, he specialised in equity research in the auto, infrastructure, shipping and logistics sectors, post-which he managed the UTI Transportation and Logistics Fund. In October 2016, he joined IDFC AMC as the associate director–fund management, where he is responsible for equity fund management and equity research and at present manages the IDFC Tax Advantage (ELSS) Fund and IDFC Sterling Value Fund. Daylynn has over 13 years experience in the mutual fund industry and is a B.Com (H) and PGDM.

He is quite sanguine on equity as an asset class for multiple reasons. “Firstly, investors have benefitted from the move towards ‘financialisation’ of household savings and today a higher proportion of their savings are enjoying the potential for above-inflation growth through equities, combined with the high transparency, liquidity and lower transaction cost offered by mutual funds as compared to traditional physical assets,” he says. “However, I have often seen that investors can be lured into chasing quick returns by being attracted to stellar recent investment returns. Unfortunately, very high quick returns are most often not sustainable, and such investment strategies can end up in a failure,” he adds.

Investment strategy

According to him, making investment choices just based on immediate past performance is like driving a car looking through the rearview mirror. The opportunity is in the future, and several other factors need to be considered. At IDFC, he seeks out stocks that are under-appreciated by the market relative to their peer group and the company’s earning potential and also look for companies that have good operating leverage, i.e. companies which have set up capacities and are yet to reap the benefits of higher utilisation. His investment philosophy is rooted in being patient and believing in the growth potential that equity investing can generate. This philosophy also drives him to look for businesses where the management focuses on return on invested capital (ROIC), cash-flow generation and prudent capital allocation.

For retail equity investors who are just starting their investment journey, he recommends a goals-led approach to building a portfolio.

Their goals will help factor in time horizon, risk appetite, liquidity and other considerations. Once implemented, it is important not to b swayed by short-term market conditions or immediate performance, but to remain focused on the original financial goal and review periodically to help remain on track.