In the first part of our conversation we spoke about absolute basics of factors investing and dove deep into the two major factors — low volatility (low vol) and momentum. We spoke about why these factors exist and the explanations, return expectations, and how to use them in an asset allocation framework.

For this episode, we focused on the other two factors—value and quality. We talk about how value as a factor is different from the popular "value investing", how to really measure the value and how to implement them. We also covered what is meant by quality, why it works and if it's a real factor.

Sankaranarayanan Krishnan is a quant fund manager at Motilal who has rich experience designing factor models and managing factor funds.

We hope you enjoy listening to this conversation

Asset allocation is one of those fancy-sounding terms. We all keep hearing about it non-stop everywhere, but very few investors think about it, and even fewer have a sensible asset allocation that works for them. At its simplest, asset allocation is not putting all your eggs in the same basket. In other words, it’s about spreading your money across different asset classes like equity, debt, gold, and real estate. This naturally leads to the question: how do I figure out a good asset allocation. Asset allocation is as much a science as it is an art.

The objective of asset allocation is to help you reach your financial goals. Coming back to the question of how you figure out a good asset allocation, there’s no perfect asset allocation that’s objectively good for everyone. There are multiple approaches, and each has its own pros and cons. For example, a naive asset allocation that has equal allocation to different asset classes is a perfectly sensible strategy in the right context and for the right type of investor.

In this episode, we caught up with Ashutosh Bhargava, fund manager and head of research at Nippon India Mutual Fund. Ashutosh manages the Nippon India Balanced Advantage Fund, among other funds. Given the nature of the fund, he’s thought deeply about the concept of asset allocation and its various dimensions. In this conversation, we talk about:

1. His background and how he stumbled on asset allocation
2. Various approaches to asset allocation
3. Static asset allocation vs. dynamic asset allocation
4. Selecting the right parameters to guide asset allocation decisions and their trade-offs

Dark patterns are tricks used by applications and websites to make users do things they don't want to. They rely on exploiting our behavioural biases and cognitive limitations. We all encounter dark patterns in our daily lives, like:

1. Making it easy to subscribe but hard to unsubscribe. 2. Pre-selecting actions like purchasing insurance, offering tips, payment methods etc. 3. Some e-commerce platforms "sneak" new items that you didn't choose just before the payment step. 4. Hiding or obscuring important details. 5. Using scary and fearful language. In this conversation, Ashish Aggarwal (head of public policy at NASSCOM), Kailash Nadh (CTO at Zerodha) and Bhuvanesh R (Zerodha) discuss how dark patterns are harmful for users and the kind of regulations that must surround them.

The entire transcript of this conversation is available here.

Trading is one of the most stressful activities. It's a also very lonely activity. Every second there is a change in your profit and loss which leads to happiness, sadness, stress anxiety, and a cocktail of other emotions making trading an emotional roller coaster.

On the occasion of #WorldMentalHealthDay, Dr. Preeti, a clinical psychologist at Lissun, chats with Abid Hassan, founder of Sensibull. They dive into why prioritizing mental health is a game-changer for traders aiming for long-term success in the markets.

Financial influencers or finfluencers have become incredibly popular in the last 4–5 years. While there are a lot of amazing people who teach people about trading and investing, there are many that sell greed and set wrong expectations. SEBI recently came up with a consultation paper on regulating finfluencers. In this video, Nithin, Abid (Co-founder & CEO of @BeSensibull) and Sandeep Parekh (Managing Partner of Finsec Law) discuss the issue of finfluencers, SEBI's consultation paper and the challenges of regulating them.

Check out this post for the transcript and relevant links.

Thomas Carlyle, the Scottish writer and philosopher, called economics the dismal science. I don’t know if you’ll agree but having read economics textbooks, I certainly think they’re dismal. They’re filled with unnecessary complexity, pointless jargon and theories that have been dead and buried for decades. While economics as a discipline has progressed, the textbooks used today are stuck in the dark ages.    

Then I came across Macroeconomics: An Introduction by Alex M Thomas and I regretted not having this as my textbook when I was studying. Though it’s meant to be a textbook, it doesn't read like one. It’s a brilliant book that weaves classical economic theories with excerpts from wide-ranging Indian literature to highlight the structural, social and cultural complexities of the Indian economy. It’s one of the very few books to do so. 

Apart from just making macroeconomics more relatable Alex introduces an alternative approach to understanding macroeconomics, which questions the dominant (marginalist) approach. This alternate approach is inspired by the works of the old masters like Adam Smith, David Ricardo, Karl Marx, John Maynard Keynes, and Piero Sraffa.   I learnt a lot while recording the podcast. I hope you enjoy listening to the conversation as much as I enjoyed recording it.   

Link to the book: https://www.amazon.in/Macroeconomics-Introduction-Alex-M-Thomas/dp/1108731996 

1:27 - About Alex M Thomas 

4:51 - What is political economy? 

6:35 - Theory of interest rates 

10:11- Why should you read this book? 

11:29 - The problem with economic teaching 

14:41 - How is this book different? 

15:41 - The dominant (marginalist) approach 

18:57 - How to approach economics 

22:32 - The economy as an embedded system 

26:10 - Theory of wages 

29:52 - Marginalist theory in policymaking  

34:15 - Theory of money

44:15 - Modern monetary theory

You can read the full episode transcript here.

If you have any questions or thoughts about the topics in the conversation, post them on TradingQnA.

If you enjoyed listening to this episode, do let us know @zerodhaonline on Twitter.

In the last 15 years, Indian asset management has grown leaps and bounds. One of the amazing success stories of this period has been Mirae Asset management, which is best known for its well managed equity funds. 

In this episode, I caught up with Swarup Mohanty, the CEO of  Mirae Asset Investment Managers (India). Swarup has been at Mirae since day 1 during a period when both Mirae and the Indian markets have grown immensely. I hope you enjoy listening to the conversation as much as I enjoyed recording it. 

In this episode, he speaks about: 

0:00 - Introduction 

2:55 - Influx of young investors into the markets 

5:55 - The evolution of Indian asset management 

10:15 - Thoughts on the current market cycle 

15:05 - The biggest mistakes investors make 

20:55 - What’s it like to be the CEO of Mirae? 

26:15 - Performance chasing 

31:17 - Are there too many AMCs in India? 

34:14 - Active vs passive  

If you have any questions or thoughts about the topics in the conversation, post them on TradingQnA.

If you enjoyed listening to this episode, do let us know @zerodhaonline on Twitter.

We are at an important crossroads in history. The pandemic might seem like it’s behind us but we have a raging war in Europe, unprecedented sanctions, currency crises, inflationary pressures, and volatile markets. There are early signs of a shift away from the dollar and uncertainty about the US led global order.

So what does all this mean for India and the world? We caught up with Debashish Bose, Managing Director—Public Equities at Oaks Asset Management, to make sense of it all.

In this conversation, Debashish talks about:  

1. How money is created in the modern world 

2. The geopolitical divide 

3. Fall of Yen and Japan’s currency conflict 

4. Limited power of central banks  

5. Cracks in the current dollar-dominated system 

6. Advice for investors and much more

Debashish had come on the show previously and we had talked about making sense of the macroeconomic developments in the world. You can check out that conversation here:

You can follow Debashish on Twitter for more. We hope you enjoy this insightful conversation as much as we did, recording it 😀  

Timestamps  0 - Introduction  

1:34 - Creation of money  

10:14 - Financial repression 

 11:50 - The geopolitical divide  

16:33 - Japan’s currency conflict  

27:43 - Do central banks have enough power?  

32:34 - Is the dollar system breaking?  

40:10 - China, Russia and deglobalisation  

47:46 - Bretton woods III? 

55:00 - What to do as an Indian investor  

1:08:30 - What about gold?

If you have any questions or thoughts about the topics discussed, post them on TradingQnA.

If you enjoyed listening to this episode, do let us know at @zerodhaonline on Twitter.

Up until the 1990s, the Capital asset pricing model (CAPM) was the dominant model used to explain market returns. But in 1992 Nobel Laureate Eugene Fama and his partner, Ken French said that market returns can be explained by three factors namely:
1. Value: the tendency of cheap stocks to outperform costly stocks
2. Size: the tendency of small cap stocks to outperform large cap stocks
3. Market factor: the risk premium of the market over the risk-free rate, like a government bond.

Over a period of time, other factors like quality, momentum, and low volatility were added. Institutions were the first to adopt factor investing but with the popularity of ETFs, around 2010, factor ETFs also known as smart beta ETFs started becoming popular in the United States. Given that Indian markets are still very young compared to the US, we just had our first wave of factor or smart beta funds around 2017. But in the last 3 years, there has been an explosion in factor ETFs and mutual funds.

But investors often think of factor investing as a guaranteed way to generate higher returns than the market. They often look at the historical returns of factors like value, momentum, quality, and low volatility and think that these factor funds will always outperform Nifty, which isn’t true. Having said that, factor investing can play a very important role in your portfolio, and it’s important to know how to use these funds in your asset allocation.

This week on the show, we caught up with Sankaranarayanan Krishnan, a quant fund manager at Motilal who has rich experience designing factor models and managing factor funds. In this conversation, we start with the absolute basics of factors investing and talk about two major factors — low volatility (low vol) and momentum. We talk about why these factors exist and the explanations, return expectations, and how to use them in an asset allocation framework.

In this conversation, Sankar talks about: 

1. How did he become a quantitative fund manager
2. What are factors
3. What drives the returns of factors
4. Will factors continue working forward?
5. Factor performance in India
6. Are factors free lunch?
7. Introduction to low volatility and momentum
8. Why do low volatility and momentum anomalies exist
9. Does the macroeconomic environment matter for factors?
10. What would make low volatility and momentum stop working?
11. Various approaches to implement low volatility and momentum strategies and what investors should know
12. Are factors replacement for active funds?
13. Factors funds, diversification and asset allocation
14. Will factors always outperform marketcap-weighted indices?
15. His personal investing philosophy
16. Career advice for someone who wants to pursue opportunities in quantitative finance
17. Book recommendations. 

This was an absolute masterclass on factor investing, and we hope you enjoy listening to this conversation as much as we did recording it. We have an upcoming episode on the other two factors—value and quality.

We also have an introductory note on smart beta funds on Varsity, do check it out. 

If you have any questions about anything discussed in the episode or thoughts in general, do post them here on TradingQnA.

If you enjoyed listening to this episode, do let us know by tweeting, we are @zerodhaonline

What does it take to survive multiple market cycles and create wealth? 

This week, we have a really, really special guest. I caught up with Sankaran Naren, one of India's most admired and well-known fund managers, and the chief investment officer (CIO) of ICICI Prudential AMC. In this conversation, we spoke about his 3-decade career in the Indian markets as an investor, broker, and fund manager. He's perhaps best known for his contrarian style of investing that has helped him create immense wealth for investors. This conversation was nothing short of a masterclass on investing, and I hope you enjoy listening to it as much as we did recording it.

In this conversation, Naren speaks about:

1. How he discovered the stock market.
2. His thoughts on the current market cycle and the similarities if any between the 2008 crash and the 2000 dot-com burst. 
3. What makes him optimistic about India.
4. Contrarian investing and value investing. 
5. The influence of central banks on the financial markets. 
6. IPOs of new-age companies.
7. Corporate governance in India. 
8. Asset allocation and the role of gold, debt, and international stocks. 
9. Asset management.
10. How he invests personally and his investing philosophy.
11. Career advice for people who want to enter finance. 
12. Book recommendations. 

If you have any questions about anything discussed in the episode or thoughts in general, do post them here on TradingQnA.

One topic we keep talking about on the podcast is debt funds. As we've alluded to numerous times in the show, most investors focus too much on the equity part of their portfolio and ignore the debt part. They often take debt for granted and invest based on recommendations or based on whatever partial understanding they have. This often ends up backfiring whenever there are bad phases in the debt markets like the IL&FS, DHFL, and Franklin episodes. 

The other risk that investors don't pay much attention to is the interest rate risk. Rising interest rates are bad for debt funds, and falling rates are good for debt funds. Given the strong inflationary pressures, RBI has hiked interest twice over the last month, and that has led to the debt fund NAVs falling. Predictably, over the last 3 odd months, the most common query from mutual fund investors was, “why are my debt fund NAVs falling?.”

So we caught up with Mahendra Jajoo, the CIO of Fixed income Mirae Asset India. In this conversation, Mahendra talks about:

1. What's happening in the debt markets
2. Why are debt fund NAVs falling
3. Why are interest rates rising
4. What's causing inflation?
5. Why have debt in your portfolio?
6. How should investors invest in a rising rate environment
7. Tips on building a debt portfolio and much more

Hoep you find this useful.