No, we would not put our investors' money at risk

Posted On Monday, Oct 06, 2014

Stock Markets are trying to reach a new zenith almost every other week. There’s enough noise out there from your friendly neighbourhood financial advisors, whose phones are not only ringing but also get answered at the first ring, and the financial ‘wizards’ are all saying – ‘buy now’… and we seem to be getting swayed with all the noise...

And we at Quantum, perish the thought, are not buying, but holding huge amounts of cash!!

Hence one of the most common questions I get asked in my interaction with investors of Quantum Long Term Equity Fund* is “Aren’t you worried that the fund may under perform if the market continues to rally given your large cash position”?

Let me try and address this question in this article.

Quantum Mutual Fund, as per its founding philosophy follows a simple process to investing , we buy when we believe a company stock’s valuation is attractively priced relative to long term earning potential and historical valuation and we sell when we believe a company stock’s valuation is expensive based on long term earnings potential and historical valuations. This analysis is at a stock level and not at an Index level.

Whenever our pre determined buy limit for a stock is triggered, the company becomes a part of the portfolio and whenever a sell limit is triggered we exit the stock. Whatever remains is cash. During large flow driven markets like we have one right now, a lot of the stocks hit our sell limit forcing us to sell out of them raising our cash levels.

If the market continues to rally driven by relentless flows then surely we will under perform, but that does not worry us. We understand that markets can stay expensive for a very long time. Just because we believe markets are expensive is no reason for markets to correct. Rationality will play second fiddle to momentum in such markets. All it means is stocks which we believed were originally expensive have turned even more expensive as they continue to rally, increasing downside risk.

What we will not do is allocate our investors hard earned savings into stocks which we believe offer no upside based on fundamentals. We would be putting our investor’s money at risk, something we would never do.

Did a video recently on this subject , please click here to view it.

Patience and discipline have been the two virtues which have allowed Quantum Long term Equity fund to build an outstanding track record over time. even if the markets chase momentum, we will stay focussed on fundamentals.

*Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*
Quantum Long Term Equity Fund
(An Open-ended Equity Scheme)
• Long term capital appreciation
• Investments in equity and equity related securities of companies in S&P BSE 200 index.
• High Risk (BROWN)
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Note: Risk is represented as:
(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 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. 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.

Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Please visit – 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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