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Posted On Wednesday, May 27, 2015
"Market tanks 630 points!" you read on a Friday, and on the following Tuesday, "Market gains 500 points!" And again on the following Monday, "Market loses 360 points". Not the kind of news investors enjoy. Too much for an investor whose eyes are always on market movements.
Indeed, the stock markets have had a very volatile period the last couple of days. The market that was in a steady rally starting from September 2013, a "hope rally", beginning with Mr. Narendra Modi's nomination as the Prime Ministerial candidate by his party, the rally got a few notches. Going by definition the market actually had a correction (a correction is typically 10% change in market level in a short period), although a minor one, according to us.
So are we implying the markets need to correct further? It's a YES! In fact, in our view we are not even close to a decent correction, with the disconnect between ground realities - absence of capex, demand and good earnings - and stock market levels being more evident now.
We don't wish to sound like merchants of doom but by putting this across, in the event it happens we hope that investors will be prepared to do what is best for them. Knowing the rationale behind a significant fall (or rise), knowing that a correction was due, and basically knowing that volatility is the essence of markets will help you score well as an investor.
Be market neutral, ignore market levels
That's why we would endorse a "market neutral" investment approach for investors. Where investors do not sway to market movements - flee with all they invested when markets seem to be falling and run in to try and capture gains when they are rising.
Because nobody is good at predicting market moves. Investors tend to exit when they should enter and enter when it's better to tread cautiously. However every tempered investor knows that over a long period of time equities have shown themselves to be among the top avenues to create wealth.
Sample the returns delivered by equity mutual funds over different periods -
|Index||1 Year||2 Year||3 Year||4 Year||5 Year||7 Year||10 Year|
|CRISIL - AMFI Diversified Equity Fund Performance Index||43.10%||31.23%||21.77%||14.25%||13.39%||12.42%||18.73%|
Note: Returns as on March 31, 2015; Past performance may or may not be sustained in the future.
Please refer below for methodology of CRISIL - AMFI Diversified Equity Fund Performance Index
So such tempered investors would be unfazed by the little disturbances that come midway. They would focus on asset allocation and stick to their investment plans.
We’re not worried about the markets
At Quantum AMC, if you have been following our newsletters, the message put across by the fund managers of Quantum Long Term Equity Fund has been constant: we are market neutral when it comes to managing our investors' portfolio. We, like the rest of the world, don't know whether the market will go up or down tomorrow, and honestly it does not matter, as our portfolio selection has nothing to do with market timing. It is only meaningless noise and doesn't add value. However what they actively monitor is the valuation of stocks. When one of the stocks in their radar hits the buy level, it would be executed regardless of if it was the day the markets hit their all-time high.
Markets work on mass psychology patterns, and in the short term they could defy ground realities. In our view this is what we have witnessed in this rally. Therefore cash levels in equity schemes still continue to be at a high level as the fund management team's research still indicates expensive valuations.
But this does not make us scared. We witnessed a similar situation in the initial years when we had just launched the Asset Management business. The markets, according to our research, were overvalued and our flagship fund would underperform… until the time correction occurred, and then the fund took off!
So we would stick to our guns and wait, until either a correction occurs or our valuations outlook warrants a dramatic revision. In the meanwhile we would, of course, be looking out for buying opportunities that could emerge even in this present scenario. Because we firmly believe in the long term growth story of India.
We'd advise you to do the same. Stick to your guns, stick to your equity investments and asset allocation. Don't fret over fluctuating market levels. Think long term and remain focused on your financial goals.
If you do this, stock market tickers blinking with red, downward pointing arrows won't make you nervous. You’d not lose sleep at night, in knowing that these disruptions are unlikely to shake your long term investments. You'd have laid the foundation for a solid fortune in the long term future. Do consult your financial adviser for investments related matters.
|Name of the Scheme & Primary Benchmark||This product is suitable for investors who are seeking*||Risk-o-meter of Scheme|
|Quantum Long Term Equity Value Fund |
An Open Ended Equity Scheme following a Value Investment Strategy
|• Long term capital appreciation|
• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index.
Investors understand that their principal will be at Moderate Risk
|(BLUE) investors understand that their principal will be at low risk||(YELLOW) investors understand that their principal will be at medium risk||(BROWN) investors understand that their principal will be at high risk|
Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article / video 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.
CRISIL AMFI MF Performance Indices Methodology:
CRISIL - AMFI MF Performance Indices seeks to track the performance of the mutual funds across various categories. CRISIL - AMFI Large Cap Fund Performance Index is based on large cap funds which are ranked under CRISIL Mutual Fund ranking are part of the index. CRISIL - AMFI ELSS Fund Performance Index is based on ELSS funds which are ranked under CRISIL Mutual Fund ranking are part of the index. CRISIL - AMFI Liquid Fund Performance is based on the liquid funds which are ranked under CRISIL Mutual Fund ranking are part of the index. Total Return Index, is adjusted for corporate action in the mutual fund schemes. Index portfolio is marked-to-market on a daily basis using adjusted Net Asset Value (NAV). Funds which are ranked under CRISIL Mutual Fund ranking are part of the index. Eligibility of funds are based on minimum NAV history and a minimum AUM. Index values are calculated on daily basis using chain-link method. Asset weighted returns and quarterly rebalancing is carried out. CRISIL Limited (CRISIL) has taken due care and caution in preparing this performance based on the information obtained by CRISIL from sources which it considers reliable. CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / information and is not responsible for any errors or omissions or for the results obtained from the use of Data / information. Please refer the website for methodology and disclaimer.
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