How DIY Investors Should Select Funds

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• How DIY Investors Should Select Funds

Simplicity. Transparency. Integrity.
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What Is Your Saving Mantra?
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• Is it
• Income Expenses Savings
• Or
• Income Savings Expenses

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Small Regular Saving Fortune In Making
What you save every month For How much did you save How much it could earn every year You will have (Compounded Annually)
Rs.1,000 20 years Rs.2,40,000 10 Rs.7,23,987
Rs.1,000 20 years Rs.2,40,000 12 Rs.9,19,857
Rs.1,000 20 years Rs.2,40,000 15 Rs.13,27,073
The numbers used in the table are for
illustrative purpose only and does not guarantee
any return.
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Savers Still Heavily Reliant on Cash
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Source Central Statistics Office (CSO)
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Cost of Living and Your Investments
Consumer Basket 1990 2000 2010 2015 2020E CAGR
TOTAL SPENDING PER ANNUM 23,759 68,923 151,279 280,064 427,619 10.1

Price of gold, INR/10 grams 3,409 4,528 18,268 26,335 52,000 9.5
Units ( Grams) of gold to consume my basket 70 152 83 106 82

BSE SENSEX 730 4,659 15,585 26,557 37,935 14.1
Units of BSE-30 Index to consume my basket 33 15 10 11 11

Fixed Deposit Basket Index Value (Value of initial investment Jan 1, 1990 1000) (SBI 1 Year Deposit Rate) 1,064 2,220 3,550 4,628 5,836 5.8
Units of FD Basket to consume my basket 22 31 43 61 73

• Quarterly compounding and Tax rate on Fixed
  Deposit assumed to be 30
• 2020E As on August 2020

Source RBI, Bloomberg Past Performance may or
may not be sustained in future.
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What is Asset Allocation?
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Summer
Monsoon

• Asset allocation involves dividing an investment
  portfolio among different asset categories like
  equities, bonds, property, commodities and cash

Street vendor
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Asset Allocation
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• Helps you override emotions
• Helps you overcome biases
• Helps to tide over market cycles

Past performance May or May not sustained in
future
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Significance of Asset AllocationIt is generally
seen that more than 90 of the variations in a
portfolios return can be attributed to the asset
allocation decision.
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Asset classes go through cycles-Bear (Pessimism)
and Bull (Optimism)
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Rule 1 Embrace Market Cycles
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sensex 49 Sensex 49 Gold 26 Sensex 83 Gold 23 Gold 32 Sensex 28 Sensex 11 Sensex 32 Bonds 9 Bonds 13 Sensex 30 Gold 8 Gold 16 Gold 29
Gold 20 Gold 16 Bonds 9 Gold 24 Sensex 19 Bonds 7 Gold 12 Bonds 4 Bonds 14 Sensex -4 Gold 11 Gold 5 Sensex 7 Sensex 14 Bonds 9
Bonds 4 Bonds 7 Sensex -52 Bonds 4 Bonds 5 Sensex -24 Bonds 9 Gold -5 Gold -8 Gold -7 Sensex 3 Bonds 5 Bonds 6 Bonds 11 Sensex -7

• Past performance may or may not sustained in
  future
• YTD - Jan to September 2020
• The chart ranks the best to worst performing
  indexes per calendar year from top to bottom
• Past performance may or may not be sustained in
  future.
• Indices Used SP BSE Sensex MCX Gold Commodity
  Index and
• CRISIL Composite Bond Fund Index
• Source Bloomberg

Imagine someone holding an all equity portfolio
in 2008, or holding none in the equity rally that
followed?
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• Cycle of an Investors Emotions

• Can you control what is happening in the market?
• Can you control how you react to what is
  happening in the market?

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Know your Behavioral BiasesThese can prevent
you from choosing/sticking with the optimal asset
allocation
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• Herd mentality This mentality is often the
  result of a reaction to peer pressure which makes
  investors act in order to avoid feeling left
  out or left behind from the group. In the
  quest to earn quick gains from his investments,
  investors often chase returns by following the
  herd. In the process of following the herd,
  investors usually end up with the portfolio that
  is more risky and may not be appropriate as per
  his/her risk appetite. The outcome has always
  been a disappointment in terms of returns.
• Recency bias Investors get swayed by recent
  events and tend to be either overweight or
  underweight the asset class in favor/out of
  favor thus leading to inappropriate asset
  allocation. The overall risk in the portfolio
  also increases drastically as investors often
  swing their portfolios to extremes during such
  situations with the hope that the trend will
  continue in future.

People perceive things can only get better So
they BUY
People perceive things can only get worse So they
SELL
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Rule 2 Diversify
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• Mitigates risk inherent of a particular asset
  class
• Reduces dependency on a single asset class to
  generate returns
• No need to time markets
• Diversification compensates for one assets down
  cycle with another assets up cycle

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Investors Tend to Ignore Risk when Chasing
ReturnsComparison of Quantums scheme based on
high risk high return , low risk -low return
principle
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Disclaimer The above chart is for illustration
purpose only The various BSE and NSE Indices are
compiled on factors such as market cap, trading
volume, and a broad sector representation. In
doing so, the quality of the management - while
admittedly a qualitative judgement - is not
considered. This, in our view, represents "risk".
For the increased "risk" taken, financial theory
suggests that investors should get higher
returns. By adding an integrity screen to our
investment process, the Quantum Long Term Equity
Value Fund (QLTEVF) and the Quantum Tax Saving
Fund (QTSF) are attempting to reduce such "risks"
- and therefore might generate lower returns. To
peruse the performance of our schemes please see
below. Past Performance may or may not be
sustained in the future.
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Diversification in Assets Depends On
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• 1) Time horizon
• Longer time horizon ? riskier, or more volatile,
  investments
• Short term horizon ? stable, low risk instruments
• 2) Risk tolerance
• High-risk tolerance ? can risk losing money in
  order to get better results
• Low-risk tolerance ? investments that will
  preserve the original investment

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Importance Of Right Asset Allocation
Mr. A Mr. B
Age 35 years 35 years
Time to Retire 20 Years 20 Years
Retirement Corpus Required Rs. 2.20 Cr Rs. 2.20 Cr
Investment Allocation Mr. A Corpus (Rs) Mr. B Corpus (Rs)
Equities 30 95.54 L 60 1.91 Cr
Debt Cash 60 82.46 L 30 41.23 L
Gold 10 10.93 L 10 10.93 L
Total 100 1.88 Cr 100 2.43 Cr
Likely to achieve the goal ? ? ? ?
The above illustration is calculated for monthly
SIP of Rs.24,000/-. Annual Return Assumed Equity
15, Debt 8 and Gold 6. The above corpus
are pre-tax.
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Which Fund Would You Buy Based On These Facts?
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This is for illustration purpose only.
Performance figures are not actual.
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Illusions May Make You Buy The Wrong Fund
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Fund 1 Fund 2
Gain in Year 1 90 46
Loss in Year 2 -75 -47
An initial investment of Rs.10,000 would be worth Rs.4,750 Rs.7,738
How much would Fund One have to increase to catch up with Fund Two? 63 Assuming that Fund Two has no returns (Not Likely!)
This is for illustration purpose only.
Performance figures are not actual.
Look at the long term performance of the fund
before investing
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Portfolio Impact of Diversification If you
compound your money at 12 per year you are
better off than an investor who makes 25 in one
year and loses 20 in the next
Risk-Return Equity Debt  Gold Equity Debt Equity Debt Gold
CAGR 10.36 10.66 11.59 7.31 12.36
Annualized SD 9.55 14.78 22.41 3.29 17.29
VAR -15.75 -24.39 -36.98 -5.43 -28.53
Maximum Drawdown -21.43 -38.74 -56.17 -6.27 -25.22
Sharpe Ratio 0.4692 0.3236 0.2550 0.4352 0.3750
Time frame is November 2004 to June 2020. The
period is taken from 2004 since the asset
allocation weights are calculated based on
normalizing the historical monthly equity and
debt indicators. Given the normalization time
frame used in the strategy, data availability for
certain parameters beyond the time frame analyzed
was a constraint.  Compiled by Quantum
AMC Equity-Debt-Gold in ratio of 40-40-20.
Equity-Debt dynamically allocated in 80-20
range Based on Sensex TRI, Crisil Composite Bond
fund index, and Domestic Gold Prices Note Past
performance may or may not be sustained in the
future
The most diversified strategy yields similar
returns with the lower volatility, compared to a
pure equity strategy
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How Diversification could have Benefited the
Investors in the Covid-19 Sell Off in March
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Based on Sensex TRI , Crisil Composite Bond Fund
Index and Domestic Price of Gold as on 31st March
2020
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Rule 3 Rebalance Regularly
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• Allows investors to buy-low sell-high
• Taking money from an asset class doing well and
  putting it an asset class doing bad

SELL on a high when others are greedy
BUY on a low when others are fearful
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Rule 4 Keep Costs Low
Expense Ratio 1.25 2.25
Rate of Return p.a. 15 15
Years Fund 1 Fund 2 Difference
5 423,460 413,121 10,338 2.50
10 1,229,894 1,165,888 64,006 5.49
15 2,765,663 2,537,537 228,126 8.99
20 5,690,374 5,036,881 653,494 12.97
25 11,260,180 9,591,044 1,669,136 17.40
The above calculation is for monthly Investment
of Rs.5,000/- in Fund 1 and Fund 2 up to 25 years
at the beginning of every month. This is for
illustration purpose only. Performance figures
are not actual. Rate of Return before expenses.
A difference of 1 in expense ratio makes a huge
difference over the years
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Lower Costs Will Always Work For You!
This is for illustration purpose only.
Performance figures are not actual.
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Rule 5 Be DisciplinedTime in the market is more
important than timing the market
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In 2008 see the net worth plummet. Buffet's
portfolio declined from 62 billion to 37
billion. That is a 40 plummet during the
subprime crisis! The message here is - when the
stock market corrects, even the best investors'
portfolios follow suit. It is the long tenure
that capitalizes on the magic of compounding to
pay good returns. Do good returns matter? Of
course they do. But to create wealth, it is
compounding that matters more
Please note that the above information is for
explanation purposes only. The information
provided here is not meant to be considered as
investment advice/ recommendation to invest or
for asset allocation. Please seek independent
professional advice and arrive at an informed
investment decision before making any investments.
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Equities Work their Magic Over the Long Term
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Holding Period 1 year 3 year 5 year 7 year 10 year
Number of Rolling cycles 258 237 213 189 153
Number of Cycles when returns are negative 75 23 11 0 0
Negative returns period as of total Cycles 29 10 5 0 0
Number of Cycles when returns are below Saving A/c (4) 85 44 32 1 0
Below Saving A/c returns period as of total Cycles 33 19 15 1 0
           
Average Return 16.8 14.7 14.7 15.5 15.9
Maximum Returns 99.1 62.9 49.0 31.1 22.7
Minimum Returns -52.4 -13.8 -5.2 3.8 6.8
Sensex Total Return Index from Aug 1996 till Apr
2019 Source - Bloomberg
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Implementing a Multi Asset Strategy
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• There are two ways to go about it
• 1)DIY investing
• Need time/ inclination / knowledge
• 2)Solutions
• Readymade Solutions
• Guidance
• Tools

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Potential DIY Strategy Fixed Sources of Income
Future Investment Growth
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• BROAD ASSET ALLOCATION
• 12 MONTHS EXPENSES IN SAFE PLACES
• 3 MONTHS IN A BANK ACCOUNT
• 9 MONTHS IN THE QUANTUM LIQUID FUND /
• QUANTUM MULTI ASSET FUND
• THE REST OF THE MONEY
• 80 EQUITY, (QUANTUM LONG TERM EQUITY VALUE FUND,
  QUANTUM EQUITY FUND OF FUNDS, QUANTUM ESG INDIA
  FUND)
• 20 QUANTUM GOLD SAVINGS FUND
• Can lose capital in the near term.preferably
  own with a gt3 year view.

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Features of Ready made Solutions
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• Diversified Three asset classes
• Unbiased allocations
• Flexible approach
• Investments strategy and Process Valuation
  metric
• Dynamic allocation Value add
• Low cost
• Track record Upcycle , Downcycle, long term

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Lets Summarize

• Your Savings Mantra should be Income Savings
  Expenses
• Work on the right Asset Allocation to achieve
  your financial goals
• Investor emotions typically run opposite to sound
  decision making
• Mutual Funds can be used effectively to invest
  across Asset Classes
• Cost of investing matters over a long period
• Investing in Equities is a must for your long
  term goals
• A high-risk portfolio often doesnt bring
  commensurately high returns
• Drastically modifying ones allocation in
  reaction to market swings may feel natural but
  realize you may only be taking from your future
  self.

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Disclaimer Terms of Use

For AMFI/NISM Certified partners only. For
private circulation only. Mutual fund
investments are subject to market risks, read all
scheme related documents carefully. The data in
this presentation are meant for general reading
purpose only and are not meant to serve as a
professional guide/investment advice for the
readers. This presentation 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 suggested or offered based upon the
information provided herein, due care has been
taken to endeavor that the facts are accurate and
reasonable as on date. Quantum AMC shall make
modifications and alterations to the performance
and related data from time to time as may be
required as per SEBI Mutual Fund Regulations.
Readers are advised to seek independent
professional advice and arrive at an informed
investment decision before making any investment.
None of the Sponsors, the Investment Manager, the
Trustee, their respective Directors, Employees,
Affiliates or Representatives shall be liable for
any direct, indirect, special, incidental,
consequential, punitive or exemplary damages,
including lost profits arising in any way from
the data/information/opinions contained in this
presentation. The Quantum AMC shall make
modifications and alterations to the performance
and related data from time to time as may be
required. Please visit www.QuantumMF.com to
read scheme specific risk factors. Investors in
the Scheme 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 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. 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.