How DIY Investors Should Select Funds

1. How DIY Investors Should Select Funds Simplicity. Transparency. Integrity.

2. 2 What Is Your Saving Mantra? Is it Income – Expenses = Savings Or Income – Savings = Expenses

3. Small & Regular Saving = Fortune In Making The numbers used in the table are for illustrative purpose only and does not guarantee any return.

4. 4 Savers Still Heavily Reliant on Cash Source : Central Statistics Office (CSO)

5. Cost of Living and Your Investments • 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.

6. 6 What is Asset Allocation? Summer Monsoon Asset allocation involves dividing an investment portfolio among different asset categories like equities, bonds, property, commodities and cash Street vendor

7. 7 Asset Allocation • Helps you override emotions • Helps you overcome biases • Helps to tide over market cycles Past performance May or May not sustained in future

8. 8 Significance of Asset AllocationIt is generally seen that more than 90% of the variations in a portfolio’s return can be attributed to the asset allocation decision.

9. 9 Rule 1: Embrace Market Cycles Asset classes go through cycles-Bear (Pessimism) and Bull (Optimism) • 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: S&P 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?

10. 10 • Can you control what is happening in the market? • Can you control how you react to what is happening in the market? Cycle of an Investor’s Emotions

11. 11 Know your Behavioral BiasesThese can prevent you from choosing/sticking with the optimal asset allocation • 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

12. 12 Rule 2: Diversify • 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

13. 13 Investors Tend to Ignore Risk when Chasing ReturnsComparison of Quantum’s scheme based on high risk –high return , low risk -low return principle 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.

14. 14 Diversification in Assets Depends On: 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

15. Importance Of Right Asset Allocation 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.

16. 16 Which Fund Would You Buy Based On These Facts? This is for illustration purpose only. Performance figures are not actual.

17. 17 “Illusions” May Make You Buy The Wrong Fund This is for illustration purpose only. Performance figures are not actual. Look at the long term performance of the fund before investing

18. 18 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 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

19. 19 How Diversification could have Benefited the Investors in the Covid-19 Sell Off in March Based on Sensex TRI , Crisil Composite Bond Fund Index and Domestic Price of Gold as on 31st March 2020

20. 20 Rule 3: Rebalance Regularly • 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

21. 21 Rule 4: Keep Costs Low 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

22. 22 Lower Costs Will Always Work For You! This is for illustration purpose only. Performance figures are not actual.

23. 23 Rule 5: Be DisciplinedTime in the market is more important than timing the market 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.

24. 24 Equities Work their Magic Over the Long Term Sensex Total Return Index from Aug 1996 till Apr 2019 Source - Bloomberg

25. 25 Implementing a Multi Asset Strategy • There are two ways to go about it: • 1)DIY investing • Need time/ inclination / knowledge • 2)Solutions • Readymade Solutions • Guidance • Tools

26. 26 Potential DIY Strategy: Fixed Sources of Income + Future Investment Growth 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 >3 year view.

27. 27 Features of Ready made Solutions • 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

28. 28 Let’s 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 doesn’t bring commensurately high returns • Drastically modifying one’s allocation in reaction to market swings may feel natural but realize you may only be taking from your future self.

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33. 33 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.