A New Year calls for a New You

Every New Year brings with it a new start, a reason to begin again, a time when we promise ourselves to do something different. Thats why we make resolutions. Whether it is joining the gym, waking up earlier, or making some time each day for your loved ones, resolutions are meant to bring some discipline to your way of living. In this series we will be talking to you each day about how you could say adieu to the mistake of Procrastination, Over-optimism, Temperament, Chasing Performance, Emotional investing, Impatience, and Hoarding your investments. On the threshold of the New Year, we hope that the coming year brings you the needed discipline to a happy investing 2012. And we hope that by bidding these 7 investment mistakes; your year ahead starts off and carries through on a positive note.

Investment Mistake# 1: Teenage Temperament

We are sure that you care about your money. After all you spend a significant portion of your life, and a considerable amount of your efforts and resources to earn it. But then why is it that you give in to a teenage temperament and practice Speed Investing? More often than not, the binary nature of market triggers this behaviour. The risk-on and risk-off conditions may not be conducive for sound decision making. Nevertheless, if you want to handle your money carefully, then you have to slow down. Speeding may be good, but only on the racing circuit. Entering and exiting the market with a short-term objective is not good for the health of your money. If you are a serious investor and dont want to risk your hard earned money, then think of the long term. Mutual funds are a good avenue for creating wealth. They diversify your invested money into stocks and shares of different companies and this kind of diversification spreads the risk. However, a mutual fund too gives returns when you stay invested for longer. It gives you the benefit of compounding. So, dont succumb to the teenage temperament of losing foresight. Be patient with the invested money. This New Year bid farewell to impatience.

Investment Mistake #2: Impatience

An investors worst enemy is not the stock market but his own emotions. Warren Buffet, the worlds most successful investor cited the behaviour of one of the worlds geniuses. This is what he had to say:. Long ago, Sir Isaac Newton gave us three laws of motion. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases" This simply means that you have to be patient with your invested money. Dont try too hard. Dont press the panic button in a fluctuating market condition. If you have invested your money thoughtfully in a reliable company, then there is no need to worry. Mutual funds are a safe bet during volatile market situations. However, you have to be selective while choosing a fund house. Look at the investment philosophy of the fund house. It will give you an idea about their future prospect. Check if they are transparent in their operations and if they treat your money like their own. It is important to understand the investment strategies of a fund house, but it is more important to find out the intrinsic values of the company.
Quantum Asset Management Company Private Limited

Investment Mistake #3: Performance Chasing

You must have read and re-read the most common mutual fund disclaimer: past performance is no indication of future performance. But despite these words of caution, the one practice that investors commonly follow is (blindly) chasing performance. A mutual fund has a great year or two, and new investors pile on the bandwagon, pumping in their savings. Then the funds performance slips and disappointed unit-holders leap off in chaos. Most of them lose some money. Some of them lose a lot. While it may be tempting to buy the years best mutual fund, it may make better sense to stick with an investment plan that is well thought out and suits your investment goals. Chasing performance is very dangerous, yet the unfortunate reality is performance sells: Take for example, emerging markets in the early 90s, the financial boom in the mid 90s, and technology in the late 90s. Funds that invested in such sectors did phenomenally well during the boom but when the decline happened, it was the investor who saw his hard-earned savings crash to nothing.... A typical example of such buying occurs when a star rated fund house receives an award for its past performance, the entire herd rushes to buy the fund at its peak price. Jumping into an award winning fund and bailing out when the award goes to some other fund in the next year is not a sound investment decision. The bottom line is everything goes in cycles. What goes up has an equal chance of coming down and what is down has an equal chance of going up. Think about this when you have the urge to buy last years winners and sell last years losers, or when you think about jumping into a star-rated fund simply because of its stars.

The next time you decide to entrust your savings to a fund only because of its accolades, ask yourself these questions: - How has the fund performed over different market cycles? - Has the fund delivered a consistent performance? - Has a change in the fund management team caused a drastic impact on the performance of the fund? - Does the funds objectives suit your financial goals? Answers to questions like these, should help you to stop focusing only on current performance and make you stand back and view your investments with a little more thought and a little less impulse.
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Investment Mistake # 4: Emotional Investing

While your plans for New Years eve would most probably include counting tequila shots and mixing martinis, when it comes to investing its best not to mix your emotions with the decisions you make. Matters of the heart and matters of the wallet are best kept independent of each other. Hence spontaneity may be a trait that suits the contestants of beauty pageants, but its definitely not a trait that works for the wise investor. So when you decide to make your investment decision, stay calm and focused. Have your goals outlined and be aware of the risks at play. Only when you figure these issues out, should you go ahead and take the plunge. Most investors who have lost money in the markets would admit that the main cause of their failure was picking the wrong time to invest. And hence, never try to time the market. Instead use avenues like SIPs to average out your investments so that you make the most irrespective of market cycles. If you spend some time in retrospection, you would agree that investments run in cycles. Things are never always up or always down. In a general scenario, when the markets start picking up after a decline, investors are optimistic and start buying. As markets mature, investors largely give in to greed and start hoarding. After markets reach a peak and start declining, fear takes over and investors start selling. Towards the bottom of this slump investors literally panic and start dumping their investments at whatever price they get, making losses and vowing never to invest in the markets again. But then, the markets start to move up again and investors feel disappointed at backing out so early. And the cycle continues yet again... Following this trend is a sure way to lose your money to mayhem.

To invest wisely, remember that successful investors are often void of emotions. Though the key to their success lies in discipline. Avoid being too optimistic, too enthusiastic, or too confident when making your investment decisions. Neither should you panic owing to any hype or forecasts of doom. End this New Year with two reactions, Stop and Limit. Stop your heart from taking financial decisions and limit your head from feeling comfortable with the herd. We agree that there is comfort in knowing that you are a part of the group. But investment is not a sports team where you cheer with the group for your favourite player. Investment decisions are an individual choice. They have to be rational and logical. Look back at the worst investment mistakes you made. It is likely that you may have followed the herd at some time. For instance, listening to your friends advice and buying a heavily advertised fund even though its long term performance was questionable.
Quantum Asset Management Company Private Limited

Investment Mistake # 5: Ignorance

Oh yes! Weve heard about how ignorance is bliss, but that doesnt really apply to every facet of your life, especially not your finances. In fact when it comes to your investments and their well-being, nothing less than absolute awareness will do. So this New Year, dress up your attitude and make sure that you show any streak of ignorance the way to the door. Lets start by checking the investments that you already have. Lets consider your mutual fund investments: i) Do you know the investment philosophy of the fund house? ii) Do you know what are the funds long term objectives and goals? iii) Are you aware about the management team that runs your fund? iv) Why exactly have you decided to go with a particular fund? These are just some of the questions that you need to find answers to. Unfortunately, majority of investors do not read the fine print, and hence, even though investing is very simple, it ends up appearing way more complicated and complex. It does not pay to live in ignorance. Remember that if ignorance was bliss, then there would be many more happy investors. The only way to eliminate ignorance is by ensuring that you spend more time and effort

towards being an aware investor. In order to help spread awareness amongst investors, fund houses like Quantum have embarked upon local investor meets. So this New Year shed your old investment attitude with these resolutions: i) I will not let exaggerated claims made through glossy promotions and mass media advertisements influence my investment decisions. ii) I will not allocate my savings based only on the number of stars a fund owns. iii) I will not invest in a fund without analysing its past track simply because it has performed well over the last six months. iv) I will not invest in a Mutual Fund because my friend/colleague did rather, I will invest in a Mutual Fund depending upon my Financial Goals. Gift yourself some financial peace of mind, this New Year. Ignorance can have a cascading effect on your future investment pattern. It can make you emotional and you may end up with the mistake of emotional investing. Emotions can be lethal for investments. In our next article, learn how you should keep the matters of your heart away while investing.
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Investment Mistake # 6: Over-Optimism

We are usually wildly over-optimistic when it comes to New Year's resolutions, weight loss goals and investment targets. So why do we keep making the same mistake? If you have been investing money, making some of it and also losing most of it, then maybe you are a victim of over-optimism. The most probable reason why so many investment plans have an unhappy ending is not only that people foul up along the way by avoiding to get out of a fund either because you hope it will rise further or because you are losing money on it and want to avert losses. It is also because they never stood much of a chance in the first place. Their hopes were too high. When it comes to our investment decisions, we seem to put the chances of good things coming our way above the actual statistical likelihood. However, we consider the odds of bad things befalling us to be pretty remote, dont we? Hence, in the ideal world in our minds, lay-offs and bankruptcy happen to other people; favourable market conditions and rocket-fuelled growth rates are supposedly considered to be our inheritance. Alas! Wheres the reality? Investments are often subject to psychological errors, of which ignorance and over-optimism are deep rooted. Bid farewell to these investment mistakes and say hello to sensible investing. Optimism is good, but over-optimism is definitely a self-kill.

Over-optimism isn't necessarily a bad thing. It helps drive business investment and economic activity. Moreover, if you did not have a bias towards optimism, you probably would not have clambered out of bed this morning and pushed your way through the rush hour crowd to another day back at work. So, yes, all said and done, false hopes help but the problem starts up when you extend this optimism to the goals you set for yourself, especially your financial goals. Over estimating the likelihood of positive trends and under-estimating the likelihood of negative trends in the stock market is over-optimism in investment. You must get rid of this behaviour if you seek investment success. Your money will not grow with this magical thinking of optimism. You have to be grounded to take sound investment decisions. So, how do you stay grounded? Well, it is quite simple. i) Do not look at the yearly results/rankings of a Fund. Instead, focus on the four or five year averages. A long-term consistent performance is more reliable than a short-lived success. ii) Do not look at a Fund that does extraordinary things to get extraordinary results. Simplicity, honesty and transparency too can deliver outstanding results. Moreover, in order to avoid repeating this mistake, consider the way you review what you have done. One reason for repeating over-optimism is that we shape all our misses and hits into an account that shows up not how badly we've performed, but how close we came to doing well. Hence, review well!

Investment Mistake # 7: Procrastination

Dont sit and look at your money if you want it to grow. Exercise it! Unlike humans, money will not grow fatter without exercise. And the best exercise for your money is "investing it right". And the sooner you start. the better. Procrastinating refers to a postponement or a needless delay. Hence, if your investment decision is a victim of procrastination, then it is time you developed a sense of urgency. There will never be enough time to do everything you wanted to do. You may be swamped with deadlines to meet, personal responsibilities to fulfill, or even stacks of books you always meant to read, but in the end you simply get caught up. There is so much on your platter that you bite more than what you can chew. You push things to (the ever postponed) tomorrow. With the result that you invest at the last minute to save taxes; you dont read the fine print before investing; you rely on risky hot-tips to make small profits; you pay huge professional fees for gaining financial advice that could salvage your savings, etc etc. What does this choas leave you with? Definitely, not a peaceful night's sleep. If you start thinking 'Now' you might actually find the difference, especially since everyone is in the mood of holiday cheer. Think your hard earned savings. Think about your investments. Understand that saving money in the bank account will not create wealth. An American industrialist, Jean Paul Getty had quoted that "Money is like manure. You have to spread it around or it smells". You have to spread it around or it smells". It simply means that accumulated money will not grow as fast as money that is spread across asset classes. Mutual funds are an interesting way to diversify your investments. So, while you enjoy the chilling weather outside, give your money a little warm up. Exercise it, remove it from the bank account and put it at a place where it can grow. Knockout the evil of "Procrastination" and get rid of the first investment mistake. This New Year do something different... Start investing!

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and Risk Factors:

The views expressed here in this booklet constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. The data /information / opinions are meant for general reading purposes only and are not meant to serve as a professional guide / investment advice for the readers. This booklet 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 opinions given are fair and reasonable as on date. The data / information / opinions are not intended to be an offer for the purchase or sale of any financial product or instrument or units of the mutual fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. Neither of The Sponsor, nor The Investment Manager, nor The Trustee, nor 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 booklet. Quantum Tax Saving Fund : An open ended Equity Linked Savings Scheme. Investment objectives: To achieve long term capital appreciation by investing primarily in shares of companies that will typically be included in the BSE 200 index and are in a position to benefit from the anticipated growth and development of the Indian economy and its markets. Terms of Issue: Units of the scheme can be subscribed /redeemed at the applicable NAV on all Business Days. Declaration of NAV on all Business Days. Entry Load: Not Applicable. Exit Load: Nil. Risk Factors: All Mutual Funds and securities investments are subject to market risks and there can be no assurance that the Schemes objective will be achieved and the NAV of the schemes may go up or down depending upon the factors and forces affecting securities markets. Quantum Tax Saving Fund is the name of the scheme and does not in any manner indicate either the quality of the Scheme, its future prospects or returns. Scheme specific Risk:. Investors in the Scheme are not being offered a guaranteed or assured rate of return. Investment in mutual fund units involves investment risks 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. Sponsors: 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 (AMC). The Sponsor, Trustee and the Investment Manager are incorporated under the Companies Act, 1956. Please read the Scheme Information Document (SID) /Key Information Memorandum (KIM)/ Statement of Additional Information (SAI)/Addenda carefully before investing. SID / KIM / SAI can be obtained at the Investor Service Centers of AMC or office of AMC or on website www.Quantumamc.com / www.QuantumMF.com Quantum Asset Management Company Private Limited