Quantum Direct Investor Information Initiative

Questions from Path To Profit. Answered Wednesday, Mar 06, 2019

Path to Profit is an Investor Meet 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.

Q1. I will be nearing my financial goal in two years’ time. When should I redeem my accumulated corpus?
Ideally, you should redeem from any investment only if you require cash to meet some specific purpose such as purchasing a house or paying for a child’s education or any other similar goal. Otherwise, you should let it remain invested. Often times, investors let their emotions get the better of them by making hasty decisions thus foregoing optimal returns on their investments. Market conditions are not indicators for investors to exit their investments. Investors should rather have a financial goal to achieve in the long-run, regardless of market conditions.

At Quantum, we always urge investors to stay invested for the long-term. As a disciplined investor, one needs to understand that ignoring short-term market volatility is the right way to go. Redeem only if you have achieved your investment goal!

Q2. What should be the investment strategy for a senior citizen nearing retirement age, considering the uncertainty due to next Lok Sabha election?
No matter how the 2019 Lok Sabha Elections pan out, markets will eventually reflect economic growth. Investors who are approaching retirement should not make hasty decisions to maximize their returns but to maximize their savings and avoid any chances of it getting eroded. For any value/equity investor it is very important to understand that such events in the long run will not really impact your investments, more so you are only putting your money at risk of volatile markets. This is more important when it comes to senior citizens as the risk appetite is generally far low than that of a young investor.

Senior citizens’ asset allocation must be realigned to comparatively less risky instruments such debt and fixed income products to protect the accumulated corpus from market volatility. If retirement is just 5-7 years away, then risks should be avoided at all costs and one should exercise great caution. Your investments should not be influenced by election results but by financial prudence. Moreover, your investments / allocations to equities should be goal driven and defined by the fundamentals / valuations of the market. It is advised not to get carried away by market movements; rather hold on to your investments for the long run.

Q3. Would you recommend going for the SIP route or a lump sum investment while investing in value fund?
Systematic Investment Plan or SIP is one of the most advocated ways of investing in mutual funds. Without doubt SIP is a good tool for systematically accumulating a corpus by investing with market-linked investments for future goals. A lump sum investment is done when the entire amount in invested at one go into a chosen equity mutual fund by purchasing a number of units at one go. Lump sum investing strategies are mostly done by people who have surplus funds. This could be money received after retirement, inheritance from family, sale of property, or it could be that an investor amassed money in their bank account and want to invest it.

If we were to compare both lump sum and SIP mode of investments, one should understand that the performance of a particular investment will depend on market conditions at that time and if it is invested for the long term or short term in case of lump sum and cost averaging in case of SIP. Cost averaging results in an investment being purchased at an average cost spread over a period of time instead of one cost on a single day, which could be higher than or lower than the average.

In our view, SIP helps you inculcate the habit of investing, and as salaries come in monthly so should investments be. However do not rule out lump sum investing, in case you get your annual bonus or an inheritance, it is best to invest that money wisely in a suitable mutual fund. Thus to conclude, for investing in mutual funds we believe one could opt for SIP mode, unless you have a lump sum amount to invest for the long term (more than 5 - 7 years). However, we strongly suggest that you consult with your financial advisor before proceeding with any investment decision.

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.