KEEP CALM & INVEST ON

According to an old Wall Street saying, the market is primarily driven by just two emotions: fear and greed. While no one can predict the future, investing wisdom calls us to be fearful when markets are greedy and greedy when markets are fearful. But when we allow ourselves to be ruled by overriding emotions, we most often do the opposite – buy high and sell low. Today on the occasion of International Yoga Day, find out how do you keep emotions under control to help how you achieve your long-term goals, even when markets have been experiencing widespread losses?

1. Avoid turning a notional loss into a real loss: One way of controlling emotions is to control our actions. The equity market is undoubtedly experiencing a tough phase. Equity mutual funds across categories have been deep in the red, registering widespread losses. However, as we have witnessed in the past, equity markets have bounced back after several such or worse downcycles. For instance, imagine someone holding an all-equity portfolio in the downmarket of 2008 or 2020, or holding none in the equity rally that followed?

Equity market is cyclical

Source: Bloomberg. Data as on May 31, 2022. Past performance may or may not be sustained in the future

During such a time, if you would have redeemed during the equity market crashes of 2008 and 2020, you would have transferred the notional loss to a real loss.

2. Stay committed to your goals: The best way to avoid getting swept by emotions is to spell out your long-term financial goals and make goal-based investment decisions. Set your goal, attach a number or a value and a timeframe for it, and finally research the right investment avenue to achieve it. Then use the help of an asset allocation strategy – divide your investment into equities, debt and gold. Then stay invested using the goal as a roadmap. This saves you from the need to constantly monitor the market.

3. Set reasonable expectations: In the short term, equity markets can go through fluctuations and it’s difficult to assess returns. Over a longer duration, you are better able to assess return expectations. To anchor your expectations from an equity standpoint, assess how India has grown from a longer term perspective.

India’s GDP growth in the last few decades has averaged close to 6-6.5% real GDP growth. If you add our average inflation which has been close to 5-5.5%, the nominal GDP that India has is close to 11-12%. From a longer-term perspective, larger listed companies can grow a bit faster at 13%, and a smart portfolio with the ability to pick good businesses at good valuations can give you a return of close to 15%. Assuming rupee depreciation at 2%, this basic math is the key for anchoring your return expectations from equity mutual funds from a longer-term perspective in India.

Anchoring return expectations

4. Understand your risk tolerance: Avoid taking more risk than necessary. Sometimes FOMO (Fear of Missing Out) might lead to a speculative behaviour leading you to chase riskier assets such as cryptocurrency. It’s important to remember that not all asset classes move in one direction. Diversification will help you reduce portfolio risk.

You can diversify your investments across asset classes using the 12:20:80 asset allocation strategy that works well in respect of the market conditions - be it the global financial crisis, Covid crisis, or the market fluctuations we have seen post-Covid.

According to this strategy, 12 months of your money should be kept safe in avenues like a Liquid fund scheme because it does not take any credit risk and the rest of the money should be split between equity at 80% and gold at 20%. Finally, not more than 5% should be allocated to riskier asset classes such as Cryptocurrencies. Within each of the buckets, you need to diversify. For example, in the equity bucket, you need to diversify across different styles and market caps.

You can use the 70:15:15 ratio as part of the overarching Asset Allocation Strategy to rebalance and strengthen your largest block – the growth block consisting of a diversified equity basket.

It makes sense to add the Quantum Long Term Equity Value Fund which comprises of stocks at reasonable valuations and a lower leverage that will be less sensitive to the increases in the cost of capital and rate hikes than a portfolio with high PE multiples. You can additionally diversify with Quantum India ESG Equity Fund positioned for sustainable growth over the long term. Finally, diversify across different market cap and styles using Quantum Equity Fund of Funds.

Building Your Growth Block - Diversified Equity Basket

Mr. No	Fund	Allocation	Benefit
Equity Fund 1	Quantum Equity Fund of Funds	70%	1 Fund = 5-10 well researched diversified Equity schemes
Equity Fund 2	Quantum India ESG Equity Fund	15%	Shortlists funds based on environmental, social and governance parameters
Equity Fund 3	Quantum Tax Saving Fund or Quantum Long Term Equity Value Fund	15%	Follows value style lowering downside risks and helps achieve long term goals

5. Finally, exercise discipline and patience by starting an SIP (Systematic Investment Plan): An SIP can often be the simplest way to help you resist the urge to pull out of the markets and stay on track on your financial journey.

Believe in the Indian growth story and the long-term growth prospects of the equity market and keep your emotions controlled by making your investments relevant to your goals using a staggered and diversified approach.

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Product Labeling

Name of the Scheme	This product is suitable for investors who are seeking*	Riskometer
Quantum Equity Fund of Funds An Open Ended Fund of Funds scheme Investing in Open Ended Diversified Equity Schemes of Mutual Funds	• Long term capital appreciation • Investments in portfolio of open-ended diversified equity schemes of mutual funds registered with SEBI whose underlying investments are in equity and equity related securities of diversified companies	Investors understand that their principal will be at Very High Risk
Quantum India ESG Equity Fund An Open ended equity scheme investing in companies following Environment, Social and Governance (ESG) theme	• Long term capital appreciation •Invests in shares of companies that meet Quantum's Environment, Social, Governance (ESG) criteria.	Investors understand that their principal will be at Very High Risk
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 Very High Risk
Quantum Tax Saving Fund An Open Ended Equity Linked Saving Scheme with a Statutory Lock in of 3 years and Tax Benefit. Primary Benchmark: S&P BSE 500 TRI	• Long term capital appreciation • Invests primarily in equity and equity related securities of companies in S&P BSE 200 index and to save tax u/s 80 C of the Income Tax Act. Investments in this product are subject to lock in period of 3 years.	Investors understand that their principal will be at Very High Risk

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
The Risk Level of the Scheme in the Risk O Meter is based on the portfolio of the scheme as on May 31, 2022.

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