Smart systematic transfer plans can help navigate market volatility: Amit Suri of AUM Wealth

In an interview with Mint, Amit Suri, founder of AUM Wealth, discusses strategies for handling market volatility, including smart systematic transfer plans that adjust fund transfers based on market conditions. He also advises on credit card management and financial planning for discretionary expenses.

Edited excerpts

Can you share a bit about AUM Wealth and your journey in the financial industry?

I began my journey in 1991 at the age of 19. During that time, the financial market in India was still evolving and Unit Trust of India was the only player. Slowly, in the late 90s, private mutual funds houses such as ICICI and HDFC set up their own business. I started working as an agency manager for a leading mutual fund company where we trained advisors. And then, in 2005, I earned my Certified Financial Planner (CFP) certification and started my own financial practice.

How do you manage client expectations, especially in volatile markets?

Educating my clients has really worked for me. We invest a lot of time in helping our clients understand different investment options, how they behave and the market behaviour in general. We also have frequent discussions about their financial goals and the impact of short-term volatility on their long-term goals.

As a result of this exercise, I have seen that clients are less likely to panic during downturns. For instance, during the COVID-19 crash, only two out of my 600 clients expressed concern.

How should investors approach market volatility, and what strategies do you recommend during fluctuating market conditions?

Market volatility is inevitable, but the key is to tailor strategies based on the current market conditions. It’s not always about aiming for high returns like hitting sixes and fours in cricket all the time. Sometimes, investors need to focus on steady, consistent progress, like taking ones and twos.

When market valuations are high, it’s prudent to enter systematically rather than investing lump sums. Innovative tools, such as smart systematic transfer plans (STPs), can help navigate volatility effectively. These plans dynamically adjust the transfer amounts from debt to equity based on market valuation indices. For instance, during high valuations, smaller amounts are transferred, and during low valuations, larger amounts are allocated. This approach allows investors to make volatility their ally and ensures they capitalise on attractive valuations while minimising risk.

Could you elaborate on innovative investment strategies like smart systematic transfer plans?

STPs are an advanced investment mechanism that dynamically adjusts the transfer of funds based on market valuations. Unlike traditional STPs, where a fixed amount is transferred regularly from a debt or hybrid fund to equity, in smart STPs the instalment amount changes based on market valuation. For instance, when market valuations are high, smaller amounts are transferred, while larger amounts are invested during lower valuations.

This dynamic approach works like a barometer, where the market value determines the transfer amount. As valuations rise, transfers reduce, and as valuations drop, transfers increase. This ensures that investors make the most of market corrections and reduce risk during expensive market conditions. Essentially, smart STPs turn market volatility into an opportunity for better portfolio management and enhanced returns.

What are some common mistakes people make with credit cards, and how can they avoid them?

The biggest mistake is failing to pay the full credit card balance before the due date. Partial payments result in exorbitant interest rates, creating a debt spiral. Rule number one is simple: always pay the full balance on time. Rule number two is: never forget rule number one. Credit cards should be treated as a convenience tool, not a borrowing instrument. If you can’t pay in full, avoid spending in the first place.

Is it a good idea to use personal loans for discretionary expenses like vacations or weddings?

Ideally, discretionary expenses like vacations or weddings should be planned in advance. You can set up recurring deposits or invest in liquid funds to save for these events. Taking personal loans for such purposes is often a sign of poor financial planning. However, if a loan is unavoidable, keep it short-term, such as six months to a year, and ensure it fits within your repayment capacity.

What should people consider when deciding between paying off loans or investing?

This decision depends on the type of loan and the potential returns from investments. For instance, home loans usually have an interest rate of around 7-8%, and when you factor in tax benefits, the effective cost can be lower. Investments in long-term equity or mutual funds often yield higher returns than loan interest rates. Instead of prematurely paying off loans, it’s better to continue your investments while making small prepayments periodically to reduce loan tenure.

Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.