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Bad investment habits that drag you downResearchers in the field of psychology often say that it is character ratherthan intelligence that builds successful people. I think it is no different whenit comes to building your wealth. You do not need to understand the nuancesof the market or build a grand predictive model in a worksheet to make yourmoney.

It is your own temperament towards money that is, your investment habits that help you build wealth or hold you back, as the case may be. Here aresome bad investment habits that may be holding back your returns:

Daily returns monitoring: Daily monitoring of returns does more harmthan good. In equity markets, bad days and good days matter less. Bad yearsand good years matter more. Invest, shut off, and review once half yearly orannually to know whether you need to invest more to reach your goal, andwhether your funds are performing well

Chasing the toppers: You are never going to stay on top of the returnschart. Do let that reality sink in. It is therefore a waste of your effort and timeto make sure you are with the best funds or top funds. There are nopermanent toppers and you cannot churn your portfolio indiscreetly to staywith the toppers.

As long as you have funds that are performing consistently over longer timeframes (any short-term underperformance notwithstanding), you have littleto worry in terms of losing opportunities to build wealth. Also, be patient.A funds underperformance could be merely because the market was down.Not knowing this and dubbing a fund as a poor one may make you poorer.

Not saving enough: You may have the best of portfolios and funds, andmay have neatly allocated your money across asset classes, but it means littleif you are not saving sufficiently. Not having adequate savings and havingunrealistic goals pushes you to have unreasonable return expectations. Nothaving them delivered in turn disenchants you, sometimes pushing you tolook for less regulated or inefficient financial products.

Save sufficiently, have a reasonable timeframe and know what to expect.Above all, do not expect yourself or your advisor to have a crystal ball to gazeinto your portfolio future. Instead do a quick emotion check to see if youare losing control of emotions, and therefore your money.

Vidya BalaHead Mutual Fund Research

FundsIndia.com

December 2015 Volume 05 12

SaveOnTaxes.inGreetings fromFundsIndia!

I am happy toannounce a new

initiative from FundsIndia that wehope will be of use to you at thistime of the year. Yes, it istax-saving time. We hope to makeyour life a little easier on this count.We have created a website www.SaveOnTaxes.in - specificallyfor addressing these questions.

This website will tell you all thatyou need to know about payingless on taxes. Right from theamount that is stated in your salaryslip to all the deductions that arestated in your Form 16, Save onTaxes will be your one-stop-guideto knowing what you can do tointelligently deal with taxes.

Of course, we are not stoppingwith that. We believe it is notenough if you just save taxes. It isimportant that you also buildwealth. Which is why we let youknow where to invest to avoidtaxes, and how to build wealth withsuch investments. You can then logon to FundsIndia to invest in smarttax-saving options such astax-saving funds with just a fewclicks. Do visit the site to get relieffrom painful taxes!

Happy (continued) investing!

Srikanth MeenakshiCo-Founder & COOFundsIndia.com

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How to look at a funds performance

No. The most important rule in judging fundperformance is to never look at returns in isolation.Actually, analysing a fund requires metrics such asrisk-reward ratios, volatility measurement, rolling returns,and so on. You dont need to use any of those.

A few simple checks will do. Simply answer the threefollowing questions.

How has the market performed?

An equity mutual fund invests in stocks of companies.Now, if the stock market were to correct meaning thatthe price of stocks are declining it is hardly logical totag a fund with performing poorly because returns lookto be in the low-single digits.

A fund would be hard-pressed to put up high returns if itwere a market like in 2008, when the benchmark indicessank over 50 per cent.

So, here is the first point. A fund always aims at beating itsbenchmark. Therefore, the fund returns should always belooked at in the context of what its benchmark is doing.

Consider ICICI Prudential Focused Bluechip for example.It dropped 1.14 per cent in the one-year period. Thiswould normally send you into a tizzy.

But look at its benchmark, the Nifty 50. It lost 8.2 per centin one year. So, on the face of it, a decline in the NAV by1.25 per cent looks disturbing. On comparison with thebenchmark, though, returns are in fact good.

A fund has performed well if it has beaten its benchmark.

What sort of fund is it?

Stocks break up into large-cap stocks, (those with a marketcapitalisation of over Rs 12,000 crore), mid-cap stocks

(between Rs 2,500 and Rs 12,000 crore), and small-capstocks (below Rs 2,500 crore). In each market cycle whether up or down one set will outdo the others. In theyear to date, for instance, large-cap stocks have corrected,with the Nifty 50 down 4.8 per cent.

Mid-cap stocks have gone the other way, notching up a4.5 per cent gain.

The exact opposite happened in 2013, when the mid-capand small-cap indices were far below their 2008 peaks,even as the Sensex and Nifty surpassed their highs.

Your fund will have a strategy of either investing primarilyin large-cap stocks, or mid-cap and small-cap stocks, or amix of these.

Because each set behaves differently in each market cycle,comparing the returns of a large-cap fund whenlarge-caps are down (as is the case currently) with amid-cap fund when mid-caps are up, will give you acompletely wrong understanding of performance.

So, heres the second point. Compare your fund withsimilar funds, also known as its category.

Continuing with the ICICI Focused Bluechip Fund, its-1.14% returns last year would be miserable indeed if youcompared it with Mirae Asset Emerging Bluechips 17.9%one-year return. But the former is a large-cap fund andthe latter is a mid-cap fund.

So, the ICICI Fund is still better than peers such as DSPBlack Rock Top 100 or HDFC Equity, as well as itscategory average of -1.4%.

A fund has performed well if it has beaten both itsbenchmark and the category average.

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Bhavana Acharya

Looking at the returns of your fund holding today has you appaled, worried, and fuming. Thatlarge-cap fund you thought was stable and had only moderate risk has actually lost you moneyin the past one year! Is this the cue for you to change your holding? Should you instead investin that other fund that is showing high returns? Are you holding bad funds?

We have to be able to bring inflation under control because over time, things will just get tougher.If the world economy starts growing, there is inflation elsewhere. The other way of looking at thisis what is WPI saying? Has the world has controlled inflation, or in fact engendered deflation?Dr. Raghuram Rajan, Governor, Reserve Bank of India

How often has it beaten the benchmark?

Looking at the top performing funds for the year gone byin order to figure out where to invest or to switch intobecause your fund is not doing well will, more often thannot, bring you grief. The top performer in one year doesnot have to be the outperformer in the following year.

Had you invested in SBI Emerging Businesses in 2012,after you saw it among the best performers with a 56 percent return, 2013 would have seen the fund down 8.3 percent. The BSE 500 index, its benchmark, returned 31 percent and 2.3 per cent in 2012 and 2013.

That brings up the third point. Choose a fund that isconsistent in outperforming the benchmark and thecategory average. What is consistency exactly? A fundaims at investing in stocks that will perform well.

Funds that picked up Maruti Suzuki, or HDFC Bank, orBritannia Industries, or Asian Paints in past year, forexample, would have clocked good returns.

They correctly predicted that consumer companies, orprivate sector banks were the way to go. But it could alsobe that the fund got lucky that one year in picking solidwinners.

Consistency measures a funds ability to pick morewinners across market cycles, more often than the rest. Ittells you that the funds strategy keeps it ahead of itsbenchmark and category for several years.

Ideally, the way to gauge consistency is to roll the annualreturns daily for three years at least, or even five years, orsince inception.

This isnt possible for you to do, of course. Instead, look

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If our concerns on the global economy come to the fore, we say that generally the world is moredeflationary, we will have to take that into account for many of the bottom up business analyses wedo. Our take is in that kind of environment, you will see fewer companies doing well.Chandresh Nigam, CEO, Axis Mutual Fund

at the fund factsheet. It will provide returns for the threeprevious one-year periods for the fund, its benchmark,and the market. It should have beaten the benchmark, aswe explained earlier.

Aggregator websites also provide point-to-point returns,which you can calculate year wise.

If a fund is consistent in the long term, then suddenshort-term poor performance can be forgiven since it willbounce back. This underperformance can be due to itholding out-of-favour stocks or a sudden blip as aknee-jerk reaction to some news flow.

A fund is a good performer and a quality one if it hasbeaten its benchmark and category average consistentlyover the long term.

So, dont unnecessarily fret over your funds seemingly badreturns. Dig deeper and then decide whether or not youshould change your fund.

Bhavana AcharyaAnalyst - Mutual Fund Research Desk

FundsIndia.com

Index 1 Year 5 Years 10 Years

CNX Nifty -7.6 6.2 11.6

S&P BSE Sensex -8.8 6.0 11.5

CNX Mid-Cap 6.9 8.3 13.2

CNX Small-Cap 6.9 6.6 10.4

CNX 100 -5.6 6.7 11.8

CNX 500 Index -3.3 6.9 11.2

CNX Bank Nifty -5.8 7.8 15.0

CNX Energy -12.8 -2.3 6.4

CNX FMCG 1.2 17.2 17.3

CNX Infrastructure -14.6 -3.9 3.8

CNX IT -5.8 10.8 12.2

Returns (in per cent as of November 30, 2015) for less than oneyear are on an absolute basis, and for more than one year on acompounded annual basis.

Equity Performance Snapshot

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http://www.fundsindia.com/products/mutual-fund/scheme/ICICI-Pru-Balanced-Advantage-Fund-Reg-G-?c=1470RaheenTypewritten Text* This is a sponsored advertisement by ICICI Prudential Mutual Fund.

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Why youre not saving enough for your retirement

Reading this, you might think I am an old person reminiscing over my childhood days. You might be surprised toknow that I am only talking about 15-16 years in the past.

We have all witnessed the rise in prices, gradual in the late 90s and early 2000s, astronomical over the last 10 years. Yet,we fail to foresee the same happening in the future. If the prices of milk and bread can rise by a factor of 5-6 timeswithin 15 years, imagine where they might be when you retire 25-30 years from now.

Yet, when we plan for our future, we fail to take this into account. We completely fail to foresee the effect inflationwill have on our finances. Sadly, this mistake throws most peoples retirement plans haywire.

People in their late 20s and early 30s, think it is too early to start planning for retirement. They think that if they arespending Rs 30,000 per month today, they might need Rs 60,000-70,000 per month after retirement. The reality,unfortunately, is vastly different.

For a person of 30, even at a very moderate inflation of 4 per cent per year, post-retirement monthly expenses onmaintaining the same lifestyle will amount to Rs 97,300 per month. This, assuming that his lifestyle doesnt change atthat time.

And for a country such as India, which is set to grow at a fast pace, assuming inflation to be around 4 per cent will bea mistake. A modest increase of 1 per cent in the inflation rate considered above, i.e., a rate of inflation of 5 per centper year, will lead to his expenses rising to Rs 1,29,660.

So, always remember to account for inflation while planning for your retirement. Retirement, as a goal, requiresplanning for the long term.

Just as the effect of compounding leads to greater returns over time, the same way the effect of compounding willlead to prices increasing manifold till your retirement. Not taking this into consideration will leave you high and drywithin a few years of your retirement.

Take the help of our retirement calculator to plan for your retirement. Start your retirement planning today.

Gourav KumarBusiness AnalystFundsIndia.com

I remember a time when I used to go out and buy a pack of bread for Rs 2. Now the same breadcosts Rs 10-12. There was a time when I would go to the milk shop and get 2 litres of milk forRs 10. Now I get 500 ml for Rs 21. Few years ago, we bought our first washing machine for Rs5,500. The same washing machine now costs around Rs 10,000.

If there is one thing that marks families with money over the long term it is this: delayedgratification.

Bill Bonner

Errata: In the The promise of ELSS Article published in the November issue of this magazine, the graph showthe growth of a yearly investment in PPF as compared to ELSS Funds over 15 years for a yearly investment of Rs1,00,000. The article had inadvertently mentioned the amount as Rs 50,000. The error is regretted.

Gourav Kumar

http://www.fundsindia.com/content/jsp/FISmart/FISmartRetirementCalc.jsp

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Q: My bank offers other financial products apart fromfixed deposits as well. Do these other products come withthe same safety and assurance of bank deposits?

A: Your investment is not going to be any safer justbecause you are using the services of your banks productdistribution arm. The features and risk factors of afinancial product do not change whether you investthrough a bank or otherwise.

The bank is an agent as is any other distributor, only withperhaps fewer products to offer. It is important for you tounderstand the risk-return proposition of the product youare investing in. And they are certainly different from FDs.

When you buy a product through your banks third-partydistribution wing, remember, the bank may not deal withall mutual funds or insurance products or bonds.

So, chances are that you will not have an opportunity tochoose from the entire gamut of products and pick theone best for you. Hence, it is best that you do yourhomework before deciding whether to take the productthat is available in the bank.

No banking product will make it compulsory for you to

purchase a non-banking product. Yes, you may have offersor freebies, but when you need to buy, it is always a choice.

More often than not, nobody other than your relationshipmanager will, if at all, know your requirement or havesome note of records. A transfer of this person,something not uncommon, may actually leave you in thedark, if you are not too aware of the products you havebought.

True, the above risks exist even if you choose an advisoroutside a bank, but the fact is investors tend to trust abanker more because there is an emotional sense ofsecurity that a product bought through banks tends tocarry. And it may perhaps be time to move away from thatfalse sense of security, going by the number of moneylaundering cases we have heard of over the last few yearsin the banking industry.

In our opinion, you will do well not to bank on your bankfor your non-banking financial needs.

Vidya BalaHead Mutual Fund Research

FundsIndia.com

Q & A

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Sintex IndustriesSintex Industries tested a high of Rs 136.6 on March2015, after which the stock entered a corrective phase thatended at Rs 80 on August 2015. For the past two months,Sintex has been on a consolidation phase with a baseformation around Rs. 90. The resistance is placed at Rs108 and Rs 118, while the support is at Rs 98 and Rs 90.The key pivot for the stock is at Rs 108, a close above thepivot will trigger an upward trend with target at Rs 130.The stop loss is at Rs 85.

This column is targeted at investors who are registered customers ofFundsIndia for trading and investing in equity as well as prospectiveinvestors who wish to open an equity account with FundsIndia.

After staging a spectacular rally in 2014, the Nifty hasremained in a corrective mode in 2015. At this juncture,there is a strong possibility that it has completed itscorrective phase, and is at the point of reversing its trend.Immediate resistance is at 8,000, while support is at 7,700.The Nifty needs to clear the resistance level to confirmthat base formation is complete. The latest 21-day SimpleMoving Average is trading at 7,932. Above 8,000, theNifty will rally towards 8,200 and 8,350. Above 8,350, anupward trend can take the Nifty past its all-time highlevels.

Perumal RajaTechnical Analyst (Equity Research Desk)

FundsIndia.com

YES BankThe trend that emerged at about Rs 500 in May 2014continues to dominate. The correction that emerged afterYES Bank tested a high of Rs 900 levels ended at Rs 595.The stock has since then made a strong rebound, and is,at present, in consolidation phase trading within a bandbetween Rs 710 and Rs 780 that is likely to continue inthe short term, a breakout from this band will result in arally with target at Rs 950. The stop loss is placed at Rs645.

Technical View Nifty

Disclaimer: Mutual fund investments are subject to market risks. Please read the scheme information and other related documents beforeinvesting. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund,or designing a portfolio that suits your needs. Wealth India Financial Services Pvt. Ltd. (ARN code 69583) makes no warranties orrepresentations, express or implied, on products offered through the platform. It accepts no liability for any damages or losses, howevercaused, in connection with the use of, or reliance on its products or related services. The terms and conditions of the website are applicable.Think FundsIndia, a monthly publication of Wealth India Financial Services Pvt. Ltd., is for information purposes only. Think FundsIndiais not, and should not, be construed as a prospectus, scheme information document, offer document or recommendation. Information inthis document has been obtained from sources that are credible and reliable in the opinion of the Editor.Publisher:Wealth India Financial Services Private Ltd. Editor: Srikanth Meenakshi

Quality is expensive and may not provide extraordinary returns from these levels in the short term.But in a scenario of gradual economic recovery, since these stocks have steady earnings growth andstrong cash flows, it can be argued that they will still be good long-term investment bets.Swati Kulkarni, Fund Manager, UTI Mutual Fund

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The greatest con ever

Lest you think I am being unduly harsh on the worlds poor central bankers, let me turn to thewider idolatry of interest rates that seems to characterise the world in which we live. Thereseems to be a perception that central bankers are gods (or at the very least minor deities insome twisted economic pantheon).

Coupled with this deification of central bankers is a faith that interest rates are a panacea.Whatever the problem, interest rates can solve it. Inflation too high, simply raise interest rates.Economy too weak, then lower interest rates. A bubble bursts, then slash interest rates.

John Kenneth Galbraith poetically described this belief as our most prestigious form of fraud, our most elegantescape from reality The difficulty is that this highly plausible, wholly agreeable process exists only in well-establishedeconomic belief and not in real life.

This obsession with interest rates as a cure-all rests on some dubious views about the way the world works. First, isan interest rate cut expansionary or contractionary with respect to spending? Those who believe interest rates are aneffective tool clearly believe a rate cut is expansionary because it reduces the cost of financing and then stimulatesdemand (via investment, consumption, and/or net exports).

The idea that rates matter for investment is suspect. As I have shown before, firms generally rely on internal financingto fund investment, rather than borrowing. Over 100% of gross investment is financed by internal funds.

James Montier

Read the outstanding two-part report at www.gmo.com

Must Read

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1 What are the two indices used to benchmark mid-capfunds in India?

2 Who is the author of Learn To Earn?

3 Which is the first stock exchange in the world?

4 What is the document in India that presents acomprehensive report on the state of the economyonce a year to Parliament and the country?

5 Name the person in the image. He is one of thehighly regarded fund managers inIndia with a demonstrated trackrecord of good, consistentperformance across market phasesover the past decade and more.

Answers may be sent to quiz@fundsindia.com.

Answers for November 2015 Investment Quiz: 1 J P MorganAsset Management 2 Jack Bogle 3 CRISIL 4 1992 5 CRangarajan

There is no winner for the November 2015 InvestmentQuiz.

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FundsIndia Select Funds Investment QuizTax Savings Funds

These are equity-oriented funds with a lock-in period ofthree years, investment in which qualifies for deduction ofup to Rs 1.5 lakh under Section 80C of the Income TaxAct in the year of investment.

Moderate Risk High Risk

BNP Paribas Long Term Axis Long-Term EquityEquity

Franklin India Tax Shield ICICI Pru Long Term

IDFC Tax Advantage Reliance Tax Saver

Please click here for a complete listing of our preferredfunds.

What is FundsIndia Select Funds:

This is a listing of mutual funds that we think are mostinvestment worthy for a regular investor. We review thislist on a quarterly basis. Do note, however, that pastperformance is not a guarantee of future results. Pleaseconsider your specific investment requirements beforedesigning a portfolio that suits your needs. Please click herefor a complete listing of our preferred funds.

@fundsindia.com

At a macro level, the Indian economy is gradually recovering and moving into an up cycle. In thisregard, I think the cyclical sectors of the economy would do better over the next few years -Venugopal Manghat, Co-Head of Equities, L & T Mutual Fund. Read more at Marketplace, theofficial blog of FundsIndia.com.

About us: FundsIndia.com is India's leading online investment platform. It offers a wide range of investment optionssuch as mutual funds, equities, corporate deposits, and bonds, to name a few, in one convenient online location.FundsIndia.com also offers a host of value-added services such as free investment advisory services, different typesof Systematic Investment Plans (SIPs), trigger-based investing, Smart Solutions for important life goals, an AndroidApp, and more that further enrich your investment experience

Recommended Book

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