HAVE A CLEAR CUT INVESTMENT STRATEGY IN PLACE TO SUCCEED IN ALL TYPE OF ECONOMIC ENVIRONMENT:

The Portfolio (Total Existing Investment) should be mix of following products based on pre-defined objectives, when your gross Annual income lands you in higher Tax Slab.

1         And you are looking for investment horizon more than 1 year

2         And you don’t want to take stock market or Equity oriented Mutual Fund risk.

3         You have both the option of investment (i) Lump-sum as well as (ii) Recurring

4         You also have long term Goals.

Scenario - I

We appreciate your decision for avoiding stock market or Equity oriented Mutual Fund risk for investment horizon of less than 3 years.

 At the same time we need to look for better Post Tax yielding investment avenues within Fixed Income categories. (Remember your Bank Fixed Deposit pre tax returns are around 9% which means if you are in highest tax slab it is around 6%).

Now when inflation is around 8% we are actually having negative returns on our savings.

The solutions to same lies with Debt Funds of Mutual Fund (there is no exposure to equity Market)

·         If your investment horizon is more than one year you can safely invest into Short Term Plan of debt Fund (managed on accrual basis)

·         The returns after one year are treated as Capital gains & tax rate attracted to same is just 10%. (Times like now when inflation is on higher side indexation benefits are also provided which makes entire returns tax free.

·         The Post Tax Returns in process lands you with 8% to 9.50%. AROUND 25% - 30% ABSOLUTE MORE THAN TRADITIONAL BANK FD WITH EQUAL QUALITY OF SAFETY.

·         The Fund has no locking period & no entry load & no exit load (.50% before 1 year on an average)

·         You could exercise both nature of investment i.e. Lump-sum as well as recurring

Scenario – II

For investment Horizon of 3 to 5 years time frame we would request you to appreciate the importance of participation in equity through Mutual Fund for the following reasons.

1         Indian economy grows around 15% annually on rupee term, i.e. GDP + Inflation. Accordingly if our long term savings is not growing at same pace we are actually under-growing.

2         How should we realize the same? No rocket science is required. Just invest in Equity oriented Mutual Fund (MF because it substantially reduces & manages equity wealth better than individual) when PE ratio of bench mark sensex e.g. BSE Sensex, NIFTY 50 e.t.c. are trading below 15 PE. Historically investment done below 15 PE has delivered HANDSOMELY in excess of 15% CAGR for 3 year investment horizon. Having said that it’s not guarantee, just phenomenon.

Year Ending March 31st	SENSEX	One year Forward P/E	3 Year CAGR IN (%)	5 Year CAGR IN (%)	Event
1993	2281	15.7	14	11
1994	3779	19.9	-4	0
1995	3261	24.7	6	9
1996	3367	23.3	4	1
1997	3361	20.6	14	1
1998	3893	24.6	-3	-5
1999	3740	19.7	-2	8
2000	5001	24.2	-15	5
2001	3604	15.8	16	26
2002	3469	12.1	23	30	Global Market meltdown in aftermath of 9/11 crisis
2003	3049	9.2	55	39
2004	5591	12.5	33	12
2005	6493	12	34	22	Unexpected defeat of BJP
2006	11280	15.9	-5	12
2007	13072	15.4	10	6
2008	15644	20.4	8	4
2009	9709	21.1	21	N.A.	Sub Prime crisis, Lehman collapse
2010	17528	17.2	2	N.A.
2011	19445	17.5	N.A.	N.A.
2012	17404	14.7	N.A.	N.A.
2013	18836	14	N.A.	N.A.
Sep-30,2013	19380	13.2	N.A.	N.A.	Tapering of QE, Concerns on Indian economy, high fiscal deficit 7 current account deficit,high inflation & depreciating INR

P/E >= 20.  P/E>15-20. >=15 P/E.   Source: Bloomberg, CLSA & BSE India

A negative environment is what makes low P/E investing difficult, as adverse news flow adds to fear. .

Scenario – III

Having seen the above two scenario we can ourselves make out what is good for short term & depending upon risk appetite  what should be the long term investment criterion . Goal based objective also falls in same league so as investment pattern i.e. Recurring OR lump sum depending upon the time investment horizon & long term only if it justifies your risk appetite.