Expert View: Feroze Azeez, Joint CEO, Anand Rathi Wealth, highlighted that diversified equity mutual fund categories have shown strength in the last few years, where more than half of the funds outperformed Nifty 50 from 2018 to 2025. He believes that while investors may consider index SIPs, real wealth is created in SIPs into diversified equity mutual funds. He suggests an allocation of 55% in large caps and the rest in mid and small caps, which helps portfolios participate in different phases of the market cycle instead of depending on one segment alone.
Additionally, Azeez shares recommendations on key mistakes to avoid for building the right portfolio and the importance of long-term investing. Edited excerpts:
Nifty 50 has delivered relatively muted returns in 2 years, frustrating passive investors. What would be your advice—stay the course or diversify?
Passive index funds are designed to mirror the market, so when the Nifty 50 delivers muted returns, investors have very limited scope for generating excess returns. Data from 2018 to 2025 shows that only 2% of index funds managed to outperform the Nifty 50. But if we look at factor-based index funds, such as momentum, quality and low volatility funds, we see that more than half of these funds have outperformed Nifty 50 from 2023 to 2025.
But we see strength mainly in diversified equity mutual fund categories, where more than half of the funds outperformed the Nifty 50 from 2018 to 2025. This shows how active management provides much higher returns to investors due to alpha generation. Hence, investors are better off opting for diversified equity mutual funds for long-term wealth creation and gaining exposure to different market opportunities beyond the index.
Beyond index SIPs, what categories of mutual funds should investors consider?
Investors might invest in index SIPs, but real wealth is created in SIPs in diversified equity mutual funds. Diversifying across categories such as flexi cap, multi cap, large and mid cap, and across sectors and market caps will allow investors to avoid concentration risk.
Large caps bring stability to the portfolio, while mid and small-caps add growth potential to the portfolio. An allocation of 55% in large-caps and the rest in mid and small-caps helps portfolios participate in different phases of the market cycle instead of depending on one segment alone.
Investors tend to abandon SIPs or strategies when markets go through flat phases. Is patience the most underrated factor in wealth creation today?
Investors often make investment decisions based on their emotions, rather than strategy, especially during phases of market correction. Many investors even stop their SIPs in panic, thinking they can re-enter the market at a better phase. However, if we look at the data, we see that investors who saw negative returns for their SIPs in the first year saw their investments turn positive if they stayed invested for the next 4 years, and the returns they saw ranged between 17-21%. Hence, this highlights the importance of staying invested and being part of the eventual recovery that follows. Long-term wealth creation is mainly about staying consistent and disciplined through market falls, rather than timing the market.
For someone earning ₹1 lakh a month, how should they structure their investments across equity, fixed income, gold, and real estate?
The first and most important step for an investor is to create an investment strategy and asset allocation based on their time horizon and financial goals. Investors with a long-term horizon (over 5 years) should have equity as their core growth driver, with 80% allocated to it. The rest can be allocated to debt, which provides stability to the portfolio. Investors with a medium-term horizon can follow a 70:30 split, and those with a short-term horizon, of less than 1 year, can invest 100% in debt.
If investors wish for gold exposure, they can allocate it within the debt portion of the portfolio. However, exposure should remain limited and should not dominate the portfolio. Real estate, both REITs and physical, shows lower liquidity and weaker alpha generation potential compared to equity over long periods. Investors should also review and rebalance their portfolio regularly so they can stay the course of their strategy.
How many mutual funds are “too many” for a typical retail investor?
There is a misconception among investors that holding a larger number of funds means more diversification. However, without doing research and understanding what mix is ideal, blindly increasing the number of funds can increase the chance of overlap and concentration risk. So the main question of how many funds an investor should hold depends on each investor’s portfolio size and SIP amount. Smaller investors, having portfolio values less than 1L and SIP amounts ranging from 1-4K per month, can invest in around 6 to 8 funds. Mid-sized investors, who invest around 20-40K per month, can invest in around 10-12 funds, and larger investors with a portfolio size greater than 50L and greater than 50K SIP per month, can hold 10-14 funds in their portfolio.
If you had to give one rule for wealth creation, what should investors do more of and what should they avoid?
We often see investors struggle to build a proper asset allocation strategy that balances both financial and physical assets. And comparisons between asset classes are also not made on an apples-to-apples basis. When comparing investments, investors should remember to use the same measure, such as CAGR, to make a fair assessment.
At the same time, investment decisions should not be based only on returns alone, but on risk-adjusted returns. We have seen investors follow the herd, with the 2025 rally of precious metals, but very few actually assessed these assets on a risk-adjusted basis.
If we compare Sharpe ratios, equity has delivered the strongest 3-year rolling returns with the highest Sharpe ratio of 0.47, meaning it gave better returns per unit of risk taken. In comparison, gold and silver stand at 0.36 and 0.20, respectively.
Investors should also avoid falling into the trap of recency bias, where recent performance starts driving investment decisions. This was visible during the sharp rally in gold and silver in 2025, when gold rose nearly 82%, and silver surged around 160%, only to fall in early 2026, when silver fell by 16.6%, and gold declined by 6.5% in a single day.
What is your outlook on equity markets over the next 12–18 months? Do you expect leadership to come from large caps or broader markets?
If we look at different segments of the market, large caps are expected to see relatively steady earnings growth of around 12%. On the other hand, the broader market could grow at a faster pace, with mid-caps expected to deliver earnings growth of nearly 18% and small-caps closer to 20% this financial year.
These expectations are mainly driven by improving consumption trends, the possibility of RBI rate cuts and continued policy support and reforms. At the same time, markets do not appear excessively overheated right now. In fact, the Nifty 50 is currently trading below its estimated fair value by nearly 10%, which suggests valuations are still fairly comfortable. For long-term investors, this could serve as a good entry point.
We have also seen throughout 2025 and early 2026 that DII continue to support the market through strong domestic participation. That is why the domestic growth story still looks constructive over the next 12 to 18 months, even though market leadership may keep rotating across segments.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
