IPO frenzy overrated; index funds the right way to take equity exposure says Deepak Shenoy

Listing day gains is not a smart IPO game to play, says Capitalmind’s founder and chief executive Deepak Shenoy in an exclusive video interview to Money9. Speaking about the frenzy around the Zomato IPO, Shenoy said, “Listing day gains is largely a loser’s game. It is not something I find very attractive. At a retail level, if you are lucky you’ll get just one lot. How much will you gain?” Shenoy instead says it is better to wait and watch for prices to correct before investors pour in capital. “You don’t have to invest in the IPO. You can wait for listing and then invest. You can wait for three months and then invest,” he said.

Are mutual funds a better bet?

Shenoy said beginners seeking equity exposure should avoid active mutual funds. “As an investor, you will choose the best performing active funds over five years. But when you compare, you’ll see these would have underperformed the index,” he said.

It is better to take index funds that are easy to buy and cheaper too, Shenoy said referring to NSE Nifty50 as an option for Indian investors. But going global with investments is also something one can consider, according to him. “You could de a balance between the Nifty50 and Nasdaq 100 or S&P 500 as your index equity exposure,” he said.

Tide over FOMO

Through indices, investing in the top rung of the large cap may give investors a sense of FOMO or the fear or missing out. To overcome this, index investors may put aside some surplus to buy their preferred stocks directly, says Shenoy. “Buy some stocks directly and wait for a year to see your stock picking strategy,” he said.

Watch this insightful discussion to know about Deepak Shenoy’s strategies for first time as well as evolved investors looking at market-linked investments in this period of bull run.