In a recent episode of The Net Worth Show by INDmoney, Rajeev Thakkar, CIO and Director at PPFAS Asset Management and fund manager of the renowned Parag Parikh Flexi Cap Fund, shared grounded, practical advice on long-term investing. Drawing from decades of experience and principles inspired by Warren Buffett, Charlie Munger, and Benjamin Graham, Thakkar emphasized simplicity, discipline, and realistic expectations in today’s market environment.
Realistic Return Expectations in the Current Cycle
Thakkar cautioned against overly optimistic projections, noting that the Indian equity market has shifted from the high-interest-rate era of the 1990s (when returns of 15-20% were common) to a lower-inflation, lower-rate world. With fixed deposits yielding 6-7%, equities can reasonably deliver 10-12% compounded over the long term. He stressed that expecting 20% returns consistently sets investors up for disappointment and poor decisions.
He highlighted excessive optimism in areas like IPOs (often treated as lottery tickets) and futures & options trading, where SEBI data shows massive retail losses. The current market, with all-time highs in indices like the Sensex, isn’t necessarily a bubble—what matters is valuation levels, earnings growth, and individual stock prices rather than headline index levels.
Adapting Strategy as AUM Grows
Managing one of India’s largest equity funds (AUM over ₹1.43 lakh crore), Thakkar explained how PPFAS has adapted to massive growth while staying true to value investing. Returns depend on starting valuations, skill, effort, and some luck. Echoing Charlie Munger, he advised keeping expectations modest: achieving 12% when expecting 9% feels rewarding, whereas expecting 15% and getting 12% leads to frustration.
He described his approach as “aggressive” in allocating heavily to quality equities at fair prices for long-term compounding, rather than speculative bets. Over decades, overweighting equities has historically outperformed heavy fixed-income allocations.
Simple Stock Selection Framework
Thakkar simplified stock picking by comparing businesses to everyday kirana (grocery) stores. Key questions include:
- What is the company’s market value versus its profits?
- Are profits accessible (not tied up in receivables or debt)?
- What’s the debt-equity ratio? (High debt increases risk in downturns.)
- Promoter shareholding and competitive moat?
- Return on capital employed (ROCE)—a core metric for efficiency.
He advised beginners to outsource to mutual funds rather than analyze balance sheets themselves, likening it to eating at a restaurant instead of cooking complex meals daily.
Caution on IPOs and Small/Mid-Caps
IPOs resemble “first dates”—excitement is high, but rush in at your peril. Red flags include unknown promoters, unprofitable companies relying on subsidies, abnormal related-party transactions, or poor unit economics (businesses earning less than 7% on shareholder funds).
Small- and mid-cap stocks offer higher growth potential but come with greater volatility—like saplings versus mature trees. He recommended limiting exposure to 10-20% (or slightly higher in bear markets) and avoiding “overdosing” due to sharper swings in bull and bear phases.
Averaging down can be risky if fundamentals deteriorate (e.g., potential bankruptcies), while averaging up works better when the business remains strong. For mutual funds, regular SIPs naturally average costs effectively.
Behavioral Discipline and Common Pitfalls
Thakkar urged investors to combat FOMO, envy, and impulsive trading—delete stock apps for peace of mind, treat investments like long-held family assets (homes or gold), and avoid daily price checks. In volatile markets, stay invested and use auto-SIPs to remove emotion.
He quoted Buffett: “Be greedy when others are fearful, and fearful when others are greedy.” Crises like 2008 or March 2020 offer buying opportunities if valuations become attractive—don’t sell in panic.
Common mistakes include chasing past performers, market timing, over-diversifying funds (4-5 quality ones suffice), and ignoring asset allocation basics (prioritize equity over excessive scheme variety).
Global Exposure and Sector Outlook
Thakkar supports global diversification through funds like Parag Parikh Flexi Cap, which includes US exposure (up to regulatory limits). He sees value in financials (strong banks with good balance sheets), manufacturing, and avoiding hype-driven themes.
Building Wealth: The Power of Consistency
Wealth creation boils down to saving consistently, investing wisely, and allowing compounding to work. The first crore is toughest due to low initial income and lifestyle temptations, but disciplined habits—like choosing affordable options over luxury—compound powerfully over time.
Thakkar’s parting message: Focus on discipline over excitement. For most retail investors, consistent SIPs in quality mutual funds outperform stock-picking attempts. In 2026 and beyond, realistic expectations, patience, and avoiding behavioral traps make generating solid returns far easier than many realize.
This interview stands out for its calm, no-nonsense tone—offering timeless lessons in a market often driven by hype.
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