The Hindu Business Line : Money Talk

As Chief Executive and Managing Director of ICICI Prudential Life Insurance, Ms Shikha Sharma leads a team that manages millions on behalf of its customers. Here, the IIM Ahmedabad alumnus gives us some insights on how she manages her money.

When did you start investing and what led you to do so?

I began investing at the same time I began earning and it is a habit that I have stuck to for many years. I suppose as a result, over the years, the power of compounding has paid off.

What is the asset allocation strategy that you adopt? If you tend to favour a particular asset class, what would be the reason behind it?

I am, by and large, a cautious investor and diversify my portfolio across fixed income, equity and property. For retirement, I invest in equity vehicles such as ULIPs and MFs. I also take some direct equity exposure in well-managed companies. Till date, the asset classes I have stayed away from are commodities and hedge funds.

Has your asset allocation plan undergone a change as you moved up the organisational hierarchy?

When I was younger, I had more time to take care of my investments. However, as my work responsibilities grew, I adopted a long-term approach to investing and follow an asset allocation strategy that includes ULIPs, MFs and equities. At no time have I bought for short-term gains, as I do not have the time to actively manage my portfolio.

What is the extent of returns you expect from your portfolio?

I would expect a return of 9-15 per cent from my investment portfolio over the long-term.

Do you manage your investments directly or have it done through portfolio managers?

I manage my investment portfolio directly. However, I take exposure to MFs and ULIPs only when the actual investment is managed by professional fund managers.

Finally, your advice on three things that budding youngsters should do when they start off.

There are three thumb rules that I believe everyone must follow for money management. First, begin saving early. You might save for exigencies, or for retirement, or for the fuzzy `tomorrow'. Whatever the reason, the truth is, you do not know what the future holds for you, so it is better to prepare for it now. The best way to ensure that you are saving is to set aside a certain percentage of your income every month. It could be in a recurring deposit, an SIP or a life insurance policy. But do this with rigour, and you will one day appreciate the rewards that it brings you.

Which brings me to the second rule — decide what you want your money to do for you over time, be it the next month, year or decade. This will help you to plan and budget for specific milestones or events. Determine, as accurately as possible, how much you will need at that particular time, for that specific event, be it your child's education, house, or retirement. Maintain separate assets, or at least separate accounts for each of these, and individually keep track of how they are growing.

Lastly, invest in assets that suit your risk profile, but remember to always invest a certain percentage in secure instruments. Asset allocation should always be after a clear analysis of your specific risk appetite and goals, and not a factor of market movements. Also, asset allocation needs to be reviewed regularly and changed according to your requirements.

I'd like to close with something that I've learned over the years. Your resilience towards hardship is best when you are young. The impact of an adversity can be easily contained and is not as far-reaching as it would be when you have a family to care for. Health risks are fewer and career fluctuations are less pronounced. It is at this period in your life that you should call on yourself to take a little more savings, which means less for spends, so that you can be sure of a more comfortable future. Here's my advise to all the young people starting out on their careers — take the bus to work today, so that in a few years, you can take your family out for a drive in your own car.

Nath Balakrishnan

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