Fund manager insights: Ankit Jain of Mirae Asset explains core and satellite strategy for smart equity investing

In today’s dynamic market environment, investors often seek guidance on balancing growth opportunities with risk, choosing the right mix of funds, and staying disciplined over the long term. Understanding market cycles, portfolio diversification, and investment strategies is key to achieving consistent, risk-adjusted returns.

In an exclusive conversation with Upstox, Jain shares his insights on balancing growth and risk in large and midcap funds, sector allocation strategies, rebalancing portfolios, common investor mistakes, and long-term equity investment strategies, offering guidance for both seasoned and new investors navigating India’s dynamic markets.

Yes. There are times, often characterised by strong domestic economic recovery and ample liquidity, where midcaps may offer superior earnings growth potential relative to large caps.

In such scenarios, a tilt toward pure midcap stocks is favoured to maximise capital appreciation.

However, some of these shifts might be restrictive to allocation by +/-5% at any given point. Investors should interpret these shifts not as a departure from core principles, but as a strategic manoeuvre to capitalise on the higher growth trajectory of mid-sized companies that are becoming tomorrow’s large caps.

A prudent portfolio strategy should follow a 'Core and Satellite' approach. The core of the portfolio, ideally between 70% to 80% of the total equity allocation, should be invested in diversified mutual funds to provide broad market exposure and risk mitigation.

The remaining 20% to 30% can be allocated to satellite investments, such as sector-focused or thematic funds. This allows investors to take targeted bets on high-conviction sectors without compromising the overall stability and diversification of the portfolio.

Portfolio rebalancing is a necessary risk-management tool for any disciplined investor. When an investor holds a mix of midcap and diversified funds, a prolonged market rally may cause any one component (for example, midcap) to exceed its intended weightage, thereby increasing the portfolio’s overall risk.

In such instances, investors should systematically trim their midcap exposure and redeploy the proceeds into large-cap or multi-cap funds to restore the original asset allocation.

Ideally, an investor should review their portfolio every six to twelve months and do the required rebalancing.

I would say the most prevalent mistake is recency bias, where investors flock to midcap or sector-specific funds after a period of stellar performance, often entering at peak valuations.

Starting valuation becomes very important while allocating towards mid/small/thematic funds. Thus, investors should pick a fund that aligns with their objective and stick with it.

Another error is the lack of patience. Sectoral funds or consumer-focused funds, for example, may go through periods of time-correction when discretionary spending slows.

To avoid these pitfalls, investors should adopt a Systematic Investment Plan (SIP) to average their purchase costs and commit to a minimum investment horizon of 5–7 years.

For a new investor, it is better to invest in a diversified fund such as either the Flexi-cap Fund or the Multi-Asset Fund. These categories provide balanced exposure to multiple market segments and asset classes, reducing the risk.

Once an investor has become a bit seasoned, they can diversify their investment further into more focused categories such as mid-cap/small-cap/multi-cap funds depending on their risk profile.

With this time horizon, the focus should remain on spending time in the market rather than timing the market. Stick with your investments. Given the structural reforms in the Indian economy, including the push for atmanirbharta and digital transformation, the long-term outlook for Indian equities remains positive.

Investors should stay the course with their SIPs, use market corrections as opportunities to top up their investments, and maintain a diversified portfolio, which can help them withstand short-term geopolitical or macroeconomic volatility while participating in the long-term compounding of Indian corporate earnings.

Disclaimer: This article is written purely for informational purposes and should not be considered investment advice from Upstox. Investors should do their own research or consult a registered financial advisor before making investment decisions.