Keep At Least 10% Cash In Your Portfolio: Govind Parikh's Advice To Investors

Keeping cash in one's portfolio is essential, as it helps to pick up stocks at attractive valuations amid market corrections, ace investor Govind Parikh said on Wednesday, in an interaction with NDTV Profit.

One should keep around "10% cash in his portfolio", said Parikh, who is the managing director of Govind Parikh Securities Pvt.

The market veteran realised the importance of cash during the 2008 market crash, when he was unable to mop up stocks, despite the low valuations due to unavailability of cash in his portfolio.

"In 2008, the Nifty crashed 50% in six months...Unfortunately, I didn't have enough cash to buy at those attractive valuations. After that, I decided to keep at least 10% cash in our portfolio," Parikh said.

The advice comes amid the recent slide in the Indian market, with the benchmark indices coming down by 18-19% earlier this month from their September highs.

Although the market has recovered to some extent over the past couple of weeks, the frontline indices are still down by about 9% from their peaks.

Parikh said he is "extremely bullish" on the prospects of the Indian market, and expects it to rebound to the highs seen last year. He pointed out that market corrections generally last for a period of six months, and subsequently a rebound is seen.

Parikh noted that his mantra for the market is to "sell, regret and grow rich", rather than waiting perpetually with all the accumulated stock for the market to rise further.

"When you sell, and the price goes up, you regret for a while because you cannot stop the bull run. However, after some time, the price will come down and you realise that you became rich (due to profit booking)," the ace investor said.

Although this strategy may lead to regrets over missed additional upsides, it protects the investment from downside risks and allows realisation of profit.

Parikh also believes that one should trim their holding in certain stocks when the market "goes up crazily".

"When everyone starts asking what to buy, then at that time, we sell a little bit. This is done from a risk management point of view, as the cash collected at such a time is always going to be helpful," he explained.