Mahendra Kumar Jajoo, CIO, Mirae Asset Investment Managers, talked about the role of debt in portfolio diversification while speaking at the third edition of Outlook Money’s 40After40 Retirement Expo in Mumbai. Jajoo highlighted the need for diversifying portfolios with debt investments. He added that debt investments can help investors in protecting wealth.
Jajoo said debt investments can protect wealth, for individuals who have accumulated assets, an allocation to debt can help people when they transition from wealth accumulation to wealth preservation.
“There is a time when you are earning and then there is a time when you start protecting your wealth once you've created wealth you start protecting your wealth that is the stage where the debt becomes so important for your portfolio,” Jajoo said.
Jajoo said that while most investors invest in debt by opening fixed deposit accounts they should also consider investing in debt mutual funds as unlike fixed deposits the returns from debt mutual funds gain from the power of compounding.
“When people invest in debt what they do is they walk to the nearest bank branch and make an FD, Please don't do that. Even One per cent extra power of compounding is a mathematical formula that applies to every investment. Debt is an essential component of our portfolio and when you invest in debt it also gives you the power of compounding so be very smart with it,” Jajoo said.
