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Questions from Path to Profit. Answered - Part I

Posted On Wednesday, Jan 03, 2018

Path to Profit is an investor education & awareness programme that gives us an opportunity to interact with those who wish to learn more about investing. Given below are 3 questions that we fielded at a recently conducted event. We will keep releasing answers to such questions in subsequent mailers, so stay posted.

What is XIRR?

XIRR is the short form of Extended Internal Rate of Return and is used to find the return from investments done at different time periods. XIRR is nothing but an aggregation of multiple CAGRs (Compound Annual Growth Rate). If you make multiple investments in a fund, you can use the XIRR formula to calculate your overall CAGR for all those investments taken together.

Let's understand it with the help of an example. Let's say you make investments of Rs 1,000 per month in a fund for a period of 12 months, which grow to Rs 50,000 in 5 years. What's your overall return on these 12 investment installments? To get the answer, you need to calculate the CAGR for 60 months on the first installment, for 59 months on the second installment, for 58 months on the third one and so on and so forth. What XIRR does is that it aggregates all these CAGRs to give you the overall CAGR for all cash flows taken together. In our example, that comes out to be 10%.

Do companies like Satyam still exist?

Back in 2009 there was a confession that shook the markets. Ramalinga Raju Chairman of Satyam Computer Services confessed that the company's accounts had been falsified. The multi-crore scam was a jolt to the Satyam stock-holders. Later on Satyam was acquired by Tech Mahindra.

Quantum Long Term Equity Fund never invested and will never invest in such kind of companies. It's a philosophy of our fund house to give risk adjusted returns to our investors. At Quantum one of the criteria to pick a stock is also looking at the management of the company. Our main aim is to invest in high quality companies with sound management and right valuations.

Quantum's research and investment team employs the following process to create and manage your fund's portfolio.

= 25 - 40 stocks
Portfolio of stocks with broad exposure to various sectors. Reflecting three broad themes:
domestic consumption, exports and infrastructure
= 100 stocks
Regular meeting to review ideas and approve value stocks for the database.
> 200 stocks
Analysts study stocks in their sector in India with global comparisons wherever necessary. The universe is generally S&P BSE 200 with flexibility to include new issues. Research includes visit notes, financial models and investment thesis, supplemented with broker research

With a strong investment process we aim to invest in companies with strong pedigree and shun crooked companies.

Can emergency money be held in a multi-asset fund?

The Quantum Multi-Asset Fund is an ideal fund for investors who wish to diversify their portfolio by investing in one fund. The Quantum Multi-Asset Fund proportionately allocates the sum invested in equity, debt and gold. Therefore as the fund has an equity element to it, exposing your emergency money to equity is not advisable. However, it is a suitable fund for investors who wish to have exposure to equities but do not wish to take the risk of being completely exposed to equities. One may never know when an emergency might strike, hence it is important to park money in instruments where it can be easily accessible at a short notice, and your principle amount is not at risk. It is important to look for an investment where the focus is on liquidity, safety of funds and a reasonable cost. Therefore we believe that the Quantum Liquid Fund, is a fund where the principle is at lesser risk as compared to the Multi Asset Fund and you also get the redemption proceeds faster.

Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
Quantum Multi Asset Fund

(An Open-ended Fund of Funds Scheme)
• Long term capital appreciation and current income

• Investments in portfolio of schemes of Quantum Mutual Fund whose underlying investments are in equity and equity related securities of companies, debt and money market instruments and physical gold.

Investors understand that their principal will be at Moderately High Risk
Quantum Long Term Equity Fund
(An open-ended equity scheme)
• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index
Quantum Liquid Fund
(An Open- ended Liquid Scheme)
• Income over the short term

• Investments in debt / money market instruments

Investors understand that their principal will be at Low Risk

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.


Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.