“Markets Reward Patience, Not Panic”: Kalpen Parekh On What Drives Wealth Creation
In a candid conversation on the Simple Hai! Vivek Law podcast, Kalpen Parekh, MD & CEO of DSP Mutual Fund, shared his reflections on investing, market cycles, human psychology, and his own professional journey. Speaking with veteran finance journalist Vivek Law, Parekh emphasised that while the tools of investing are available to all, the discipline to use them well is still rare.
“Instinctive investing is bad investing,” he said. “Most people buy when prices rise out of fear of missing out, and sell when prices fall out of fear. That’s the exact opposite of what good investing requires.”
Parekh told Law that despite years of consistent messaging around patience and long-term investing, many investors still stop their SIPs when markets decline. Data, he said, showed that SIP stoppage ratios had crossed 100 in weak markets—evidence of how behaviour continues to undermine returns.
Fighting Evolution to Become a Better Investor
Parekh said he believed that the problem lay deeper than poor financial education. According to him, human brains were wired for survival, not markets. “Our ancestors survived by running from danger. But in markets, you’re often rewarded for doing nothing. It’s anti-evolutionary,” he explained.
He told Law that while markets were cyclical, most people approached them as if they were linear. There was a tendency to believe that good times would last forever and that bad phases happened to others. The challenge for investors, he said, was to consciously override these mental defaults.
He pointed out that there were only three things investors could control: how much they saved, where they put that money, and how long they left it untouched. Everything else—market movements, returns, even economic policy—was outside their control.
A Personal Journey Driven by Luck and Learning
Parekh also spoke about his own unconventional journey into financial services. Trained as an engineer, he chose not to pursue it as a career. Instead, he did an MBA in Mumbai in the late 1990s—a time when it was fashionable to do so—and soon found himself working with L&T Finance in money markets.
Parekh credited much of his growth to luck and the quality of people around him—bosses, colleagues, and juniors who taught him important lessons. One boss, early in his career, had advised him to “grow your EPS” and let the market decide your PE. Translated, the advice was simple: be valuable and useful, and the world would eventually reward you.
Why Most Investors Don’t Create Wealth
Despite the strong historical performance of mutual funds in India, Parekh pointed out that very few investors actually benefited. Citing the example of a fund launched in 1997 that grew its NAV over 100 times in 28 years, he revealed that only 23 investors out of 7–8 lakh stayed for the entire duration.
“Investing should be like a marriage, not a flirtation,” he told Law. “Too many people exit when things get tough, and re-enter when it feels easy again.”
Parekh acknowledged that India had the right conditions for equity investing—a democratic, entrepreneurial and meritocratic society—but cautioned against assuming that high returns were guaranteed. In countries like Japan, he said, long-term equity returns had been negligible for decades.
He stressed that people often made the mistake of investing in asset classes after they had already performed well. “A good fund bought at the wrong price can still be a bad investment,” he said. “And a bad asset class bought at the right price can turn out to be great.”
Multi-Asset Funds: A Simple Solution for Complex Behaviour
To counter these behavioural pitfalls, Parekh recommended multi-asset allocation funds, especially for investors without the guidance of an advisor. These funds, he explained, automatically diversify across equity, bonds, and gold—offering both growth potential and downside protection.
He told Law that gold acted as a kind of “magical joker,” often performing when equity underperformed. While multi-asset funds might deliver slightly lower returns than the best-performing asset class in any given year, they did so with much less fluctuation—allowing investors to stay the course longer.
He also offered a simple framework based on his 27 years of experience:
In bullish or expensive markets, invest in multi-asset funds for built-in discipline.
In cheap markets—especially after steep corrections—invest in equities for higher potential returns.
This two-line rule, he said, had worked well across market cycles globally.
Focus on Behaviour, Not Just Strategy
Parekh believed that the real question investors should be asking was not “where to invest,” but “how to become a good investor.” He drew parallels with other professions: just as one wouldn’t rely on a friend or a search engine for medical advice, one shouldn’t invest without professional guidance if they lacked expertise.
For those still inclined to go it alone, multi-asset funds offered a balanced first step. “They do the heavy lifting of discipline for you,” he said.
Ultimately, Parekh argued, wealth was created either by running a successful business or owning one. For most people, the second option—investing—was simpler. But the catch lay in execution. “It’s not a knowledge game,” he said. “It’s a behaviour game.”
Loving the Journey
Despite the pressures of the market and the cycles of boom and bust, Parekh said he continued to find joy in his work. “It’s intellectually stimulating, it’s purposeful, and it helps people solve real-life problems about money,” he told Law. “It doesn’t feel like work—it feels like life.”
After 27 years in the industry, his belief remained unchanged: good investing was simple in theory, hard in practice—and deeply rewarding for those who got it right.
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