Should you buy stocks or stick to mutual funds? Stockbroker Sagar Lele explains

The Federal spoke to Sagar Lele, a stockbroking professional and startup founder who has worked across research and fund management teams, on how retail investors should think about geopolitics, asset allocation, small caps versus blue chips, debt options, and trending strategies. The discussion also covers risks from complex products, commodities, crypto, and international diversification.

Do geopolitical tensions change how a domestic investor should invest?

Markets react to conflict and the inflation that often follows. India is sensitive to crude oil spikes because higher import costs can widen the fiscal deficit. Episodes like the Iran–Israel flare-up tightened inflation worries when crude rose. Closer-to-home tensions with Pakistan have historically produced sharp volatility. India is not insulated from these shocks; the impact depends on the nature of the conflict and transmission to crude prices and the economy.

What should a typical retail investor do during such phases?

Continue SIPs to maintain discipline. Historically, markets have recovered from conflict. Use volatility to your advantage: accumulate quality stocks at lower prices and let normalisation do the compounding. The aim is not to trade every headline but to convert drawdowns into better entry points.

Does investing directly in stocks imply a high risk appetite by default?

Not necessarily. Many new investors entered during the 2020–21 rally and saw quick gains, which created a false sense of expertise. When markets turned choppy through 2022–23, reality checks followed. Direct stock-picking is effectively a full-time job—research-heavy and time-intensive. A single investor is unlikely to match the depth of a professional team of fund managers and analysts. If you already have a full-time job, consider leaving active management to specialists.

How should one think about growth versus value—and small caps versus blue chips?

Avoid rigid labels. Cycles change. Post-2020, growth outperformed for nearly two years; when markets turned range-bound, value did better. That rotation will keep recurring. Style should be flexible, not ideological.

What role should age play in equity–debt allocation?

Age is one factor; use it as a starting point, not the destination. A workable thumb rule is equity = 1 – age (in years). For example, at 30, target ~70 per cent equity. Then adjust for risk tolerance, time horizon, cash-flow needs, and job stability. Conservative investors may dial equity down; long-horizon investors who won’t touch the corpus for decades may dial it up.

How can retail investors approach bonds and debt products now?

When rates were high, long-duration bonds were attractive. After policy cuts, forward returns look more muted than a few months ago. Portfolios still need debt for balance, but rather than buying individual corporate bonds, use debt mutual funds that diversify across government and corporate paper and let fund managers manage duration, credit, and liquidity.

Are trend tools (like Google Trends) or simple algos a good way to pick stocks?

Trends are useful for ideation, not for execution. For example, defence searches and news momentum may rise during conflicts, and many defence stocks have rallied—yet valuation matters. Avoid buying solely because something is trending and expensive. Build a “buy list” of fundamentally strong companies, track fair-value ranges, and accumulate on declines to target prices. Combine trends with financials, catalysts, and valuation discipline.

Could India face crises from complex instruments like in 2008 or rogue trading episodes?

Risk never disappears; India has seen failures and governance blow-ups, and large borrowers can trigger domino effects in the banking system. Policymakers and regulators tend to intervene early to prevent systemic contagion. For investors, the practical approach is to be prudent: avoid companies with governance red flags, stay diversified, and recognize that stressed situations can also create turnarounds under new ownership and tighter risk controls.

How should investors view commodities and currencies?

Commodities are cyclical and closely tied to inflation and global growth. Active traders can profit by buying near cycle lows and selling into strength, but commodities are generally not long-term buy-and-hold assets. Currencies and commodities can diversify portfolios tactically, provided you understand the cycles and use risk limits.

What about crypto and international equities?

Avoid grey regulatory zones. Crypto as an idea may be promising, but participation should wait for clear, domestic regulatory comfort.

For global diversification, international mutual funds or ETFs are a low-cost, low-paperwork route. Picking individual foreign stocks involves higher friction and compliance. International exposure can buffer a portfolio when domestic and overseas markets diverge.

Is there a simple checklist for new investors?

Keep SIPs running; use volatility to average into quality.

Let asset allocation start with age, then customise for risk and goals.

Prefer funds for debt exposure, and when you lack time for research.

Treat trends as ideas; buy only with valuation support.

Avoid governance-questionable companies and regulatory grey areas.

Use international funds/ETFs for global diversification.

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