Marcellus Investment Managers' co-founder, Saurabh Mukherjea, has outlined a three-pronged investment strategy for Indian investors, advocating for a balanced portfolio that includes allocations to domestic equities, US small and mid-cap stocks, and gold. This approach comes at a time when Mukherjea suggests Indian investors should broaden their horizons beyond domestic markets.

Mukherjea believes that due to factors such as US tariffs impacting Indian jobs, a consumption slowdown, and lackluster corporate earnings, the Indian market may face challenges in sustaining its record-high valuations. He suggests that a portfolio diversified across different asset classes and geographies can offer better risk-adjusted returns.

The three prongs of Mukherjea's investment strategy are:

• Indian Equities: Investing in high-quality Indian stocks with a proven track record of consistent profits and revenue growth remains a core component. Mukherjea is known for his "Coffee Can Investing" approach, which involves selecting fundamentally strong companies and holding them for the long term to benefit from compounding. He particularly favors companies with strong market positions and sustainable competitive advantages. Sectors of interest include top private banks like HDFC Bank and ICICI Bank, as well as the growing pharma and healthcare sectors.

• US Small and Mid-Caps: Mukherjea recommends allocating a portion of the portfolio to US small and mid-cap stocks. He notes that these companies are available at more attractive valuations compared to their Indian counterparts and offer significant growth prospects. He also points out that American household debt is at a 25-year low, and consumption is holding up well, making it an attractive market for investment.

• Gold: Despite historically not being a proponent of gold investments, Mukherjea now suggests including gold as a hedge against economic uncertainty and market volatility. In the past, Mukherjea has argued that gold offers lower returns and higher volatility compared to equities. He has also stated that the Indian investor's "obsession" with gold is unwarranted, especially when better opportunities exist in the equity markets. However, given the current global economic climate, a balanced approach now includes the yellow metal.

Mukherjea's shift towards including gold in his recommended portfolio strategy acknowledges the importance of diversification in mitigating risk. While he has previously emphasized the benefits of diversifying between Indian and US markets to reduce volatility and enhance returns, the inclusion of gold further strengthens the portfolio's resilience against unforeseen economic shocks.

By advocating for this three-pronged strategy, Saurabh Mukherjea aims to provide Indian investors with a well-rounded approach to wealth creation and preservation in an increasingly complex and uncertain global environment.