Are you preserving your capital or growing it?Does your idea of investing chiefly involve ensuring that you do not lose themoney you invested? Do you expect to get it back with some moderateappreciation, or to get a modest income stream from it? If yes, then youraim is to preserve capital. In other words, those of you who do not gobeyond the boundaries of fixed deposits, post office schemes, corporatedeposits and bonds, or invest in any other form of fixed income instruments(PPF, KVP, NSC), are essentially preserving capital.

Is capital preservation wrong? Not at all. No investor, whether risk-averse orrisk-taking, wishes to lose capital. So, in my opinion, capital preservation isa given in any investor’s strategy. The problem comes only if you stop withjust that.

If you are, without any rhyme or reason, taking this approach, it is very likelythat you are an investor who has not planned for any long-term financialgoals. Or perhaps you have not really invested to reach any such goal. Whydo we say this? Simply because, if you had taken the capital preservationstrategy to investing and actually planned your goal as well, two things wouldhave come to your notice. One, it is not going to be easy for you to reach yourgoals with the sums you are investing now. Two, you will have to significantlyraise your savings (often times, this number would be higher than what youcan save all your life) to reach such goals with a preservation-only strategy.

In other words, the obsession to preserve capital often times removes youfrom the reality of how much you really need to save and invest for yourfuture needs. And most importantly, while many don’t notice it, mere capitalpreservation ultimately erodes the value of your money, especially if yourmodest returns do not keep pace with rising cost of living (inflation).

When should capital preservation be your only motive? Broadly in twocircumstances: One, when you have a near-term need for the money or anear-term goal that cannot be postponed. Two, when you are not earningand need to generate some income from the capital you have in hand.

For other cases, a strategy that mixes preservation and growth would be theonly way for you to save up for your aspirations, whether your child’seducation or your own retirement. Remember, a long-term growth strategyis inclusive of capital preservation.

Vidya BalaHead – Mutual Fund Research

FundsIndia.com

October 2016 � Volume 06 � 10

It’s all a game!We recently launchedone of the moreinteresting features onour platform - a peer

ranking system that tells you whereyour investments stand incomparison with people in yourage group. We’ve also added a setof ‘badges’ that signify youraccomplishments when it comes todisciplined and sensible investing.

Together, they constitute an effortto ‘gamify’ investing and make itmore interesting. Investing is oftenseen as dry and boring - which it is,by design. But we thought, why notspice it up a little and make itgratifying in some ways? Our datascientist, Neel, came up with theidea and algorithm for how we cando this in an interesting andeffective manner.

This was one of the most funthings I’ve been involved increating for our platform. Beingthe first financial services companyto ‘gamify’ investing in India, wehad many interesting questions toanswer. For example, didsystematic investing get moreweightage or smart fund selection?What about defining peer groups?Answers to these and more arereflected in what you see in youraccounts. If you haven’t checked itout, please do and let us knowwhat you think!

Happy investing!

Srikanth MeenakshiCo-Founder & COOFundsIndia.com

www.fundsindia.com

This is a sponsored advertisement by ICICI Prudential Mutual Fund

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Where to invest your pay hikes

Avoid EMIs. SIP to spend later

While you are likely to be tempted to buy large whitegoods through EMI, do note that interest rates on loansare still not low and have not fallen the way your depositrates have.

So, unless it is indeed time for you to replace any largediscretionary consumer good, going for an EMI-basedpurchase because of a hike is not a good idea at thisjuncture.

What to do: If you can postpone your spends a bit, investyour bonus, and start a SIP in ultra-short-term debt fundsfor 6-12 months (or until you need to purchase thegoods). This will not only deliver superior returns thanyour savings bank and the current FD/RD rate but alsoprovide high liquidity. You will also avoid running a highrate, tax-inefficient EMI on your spends.

Substitute FDs with debt funds

The current interest rate of 7-7.5 per cent you will get ondeposits is far lower than the 8.75 - 9 per cent rates youearned on 3-5-year bank deposits or recurring deposits in2010-12.

Deposit rates for 3-5 year tenures. Source: RBI

So, if you are stashing your bonus in FDs, note that youwould be investing in such deposits at a time when your

post-tax FD rate is as low as 5 per cent! It would be evenworse if you started a recurring deposit for the long termat the current low interest rates. You would not be able tosave for your goals, whether for education or retirement,without falling steeply short. This is not the time for freshinvestments in deposits.

What to do: For those of you looking for substitutes fordeposits – we would say invest in debt mutual funds. Ifyou have a short-term (1-2-year need) then a short-termdebt fund is a good option to go with. Otherwise,long-term debt funds would provide you with FD-plusreturns at this juncture.

No more physical assets. Invest in funds

We currently widely read about a downturn in the realestate market and that prices are not moving. This,combined with a lower rate scenario that may follow, maytempt you to invest in real estate. But you need to becareful about the market timing. There is data tosubstantiate that the 6th Pay Commission caused a spikein real estate units bought. As a result, prices climbed uptoo fast because demand shot up, triggered by the bulkamount received from arrears in the 6th paycommission besides a steep increase in pay.

www.fundsindia.com

Vidya Bala

Whenever you benefit from a bonus or a pay hike, it’s important that you plan your spendingand investing. Spending all that you get, stashing the money in a deposit or buying real estateassets – none of these are ideal options for you right now.Here is what you should do with any pay hikes you receive.

“Going forward, artificial intelligence may play a big role in the selection of stocks and identificationof market trends. The future of our business is what I call quantamental - fundamental analysiswith a quantitative overlay.”- Navneet Munot, CIO of SBI Mutual Fund

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Despite the recent correction, real estate prices have stillnot fallen from the highs caused by the 6th PayCommission. Look at the data below.

Now, the question can be why we would not have a similarrally now. Here’s why.

One, there needs to be a lower supply than there is today.The supply of land (available for sale) and housing is farhigher now than it was 7-8 years ago and real estateresearch data suggests that there have been a large numberof unsold properties without commensurate demand; andyet there has been no reduction in prices. Hence, either aprice correction or sudden massive spike in demand isneeded to trigger a rally.

Two, the kind of demand seen post 2009 may not repeatitself. The post 2009 spike you see in the earlier chart camefrom the arrears largesse that left a lot of money in thehands of the earning class. That isn’t the case now. Arrearsare estimated to be a fifth of the 6th Pay Commissionarrears and the average pay hike is less than half. Ademand trigger like before may not happen.

Unlike a mutual fund or stock market where you canaverage your investments through buying continuously(SIPs) you cannot do so in real estate, making timing allthe more important.

What to do: If you are looking at long-term RDs or‘investment’ in real estate, drop the idea and go for acombination of debt funds and equity funds. You mayadd gold only if you fancy it and want to diversify yourasset allocation.

• If you have a 5-year timeframe or more, and you canrun SIPs, go for quality equity funds. You will besurprised to know that equity mutual funds deliveredan absolute return of 375 per cent (annualised return

of 16 per cent) between 2005 and the first half of2015; as opposed to the seemingly high return of 171per cent (index moved from 100 to 271) given in thereal estate chart above for the same period. The returnsin equity funds would have been higher through SIP.

Please note that you do not have to necessarily investin new funds. If you have existing equity or debtmutual funds, simply increase your SIP in those funds.

• For those of you who still want gold, go for thesovereign gold bonds issued by the government (if youmissed it this time, you will have more issues coming.They are the best option that you have today given the2.75 per cent interest you will get in addition to thefinal market value of gold on maturity. The maturityproceeds are exempt from tax. But make sure this doesnot account for over 10-15 per cent of your assetallocation.

Vidya BalaHead – Mutual Fund Research

FundsIndia.com

“Over the medium-to-long term, we don’t really see much risk in the EM universe. We think EMare likely to outperform; and within EMs, India continues to be a brightly shining spot.”- Manishi Raychaudhuri, Asian equity strategist at BNP Paribas

Index 1 Year 5 Years 10 Years

Nifty 50 8.3 11.7 9.1

S&P BSE Sensex 6.5 11.1 8.4

Nifty Freefloat Midcap 100 18.6 16.8 12.6

Nifty Freefloat Smallcap 100 17.2 13.1 8.0

Nifty 100 9.6 12.7 9.8

Nifty 500 11.2 13.2 9.5

Nifty Bank 12.0 15.3 13.8

Nifty Energy 27.6 4.7 5.9

Nifty FMCG 7.9 16.7 14.5

Nifty Infrastructure -1.1 1.5 0.5

Nifty IT -14.4 12.6 8.5

Returns (in per cent as of September 31, 2016) for less than oneyear is on an absolute basis, and for more than one year on acompounded annual basis.

Equity Performance Snapshot

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"We would recommend people not to look at markets in terms of all-time highs, but look atvaluation ratios as compared to historical averages."- Rajeev Thakkar, CIO and Director, PPFAS Mutual Fund

Gamifying your investments

What is the gamification module? Why do you call itgamification?

It’s a feature that ranks you among your peer investors sothat you know how you are doing relative to others. It’scalled gamification because it introduces game thinkingand game elements into investing. It encourages yourgood investment choices and discourages your bad ones.On your dashboard you’ll see it thus.

What’s the score?

It’s your percentile rank. It tells you where you standamong your peers.

What’s the score based on? Is it merely telling mehow much money I have?

The score is based on multiple factors. It doesn’t merelyrank you on the overall value of investment. It also takesinto account how disciplined and systematic you are. Soit’s quite possible that while your friend may have moreactual money invested, your score may be higher if youare following a systematic and disciplined approach toinvesting. In the long run, that just puts you on a path topossibly having more money as well!

What else is there on this feature apart from a score?

You can earn badges. Each positive behaviour that webelieve will make you a better investor will earn you abadge. It’s a recognition of your effort in staying put as adisciplined investor. Your trophy case will look thus,

Can I share the badges I earn on social media?

Not yet, but you should be able to do that soon in thefuture. We are still thinking a bit about balancing yourprivacy with the joy of social validation and sharing.

What is a good score?

Generally, the higher your score the better you are as aninvestor.

What are activities that you punish in terms ofscores?

Frequent redemptions, non-systematic and sporadicinvestment practices that suggest you’re trying to time themarket instead of being disciplined are some of thefactors that may result in your score trending down. Theother important thing that may contribute to a lower scoreis if over time your peers have improved and you haven’t.

I’m doing well. I have 4 stars. How do I get to 5 stars?

Well done! The way you improve your rank is by being asystematic and consistent investor. The easiest way to dothat is by starting a new SIP of a reasonable value. Butremember these are relative ranks. Your rating also impliesthere are those many people in the system who are doingthose very things you are expected to do. But better!

Nilakantan RajaramanData Scientist

FundsIndia.com

Nilakantan R

As you login to your account, you’ll now see on the top right corner a box that tells you whereyou stand among your peer investors! This will help rank yourself among your peers and willalso act as an instant financial health check for you. We have a podcast that explains the variousaspects of it and you can listen to it here. We hope you like it!Here’s a quick primer for you on the gamification module to get you started.

www.fundsindia.com

Q: What should someone do when his fund is not doing well (compared to peers or its benchmark)? If the

answer to the above questions is ‘to sell it off ’ or do a ‘SWP’, what should be the frequency that you suggest

to do a SWP?

A:Watch the performance of the fund for 2-3 quarters and if it is still under performing, stop SIPs first (but start in

a better fund right away) and hold. If after another 4-6 quarters the fund continues to languish, you can consider

exiting. But make sure you are moving to a better fund and not allowing the money to lie in your bank account. When

moving, doing a lump sum switch to the other fund is fine. When you move within an asset class, there is no risk of

ill-timing the market.

Q: How do I interpret these: “7.59% GOI 2029″″ and “8.13% GOI 2045″″? There are many such instruments

in the MIP funds I hold.

A: 7.59% GOI 2019 means the interest rate (coupon rate) of that instrument is 7.59% and it matures in 2029. It does

not mean that the fund will hold it till 2029. The fund may sell it anytime to gain from favourable rate movements, if

there are opportunities. In general, longer the maturity, higher the swings in prices when interest rates move. In other

words, longer dated gilts make more returns or more losses (depending on rate cycle) and are riskier.

Vidya Bala

Head - Mutual Fund Research

FundsIndia.com

Q & A

Tata Motors LtdTata Motors has declined sharply from Rs 598 to Rs 517.It has formed a strong base around Rs. 515. Now it needsto trade above the trend line support level of Rs 515 totrigger strong upside momentum with a medium-termtarget of Rs 640. Resistance is at Rs 570 and Rs 595.Support is at Rs 475. The upward trend will continue aslong as it trades above Rs 475. Stop loss is at Rs 470.

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.

Nifty witnessed a volatile month with negative bias afterhitting a high of 8,968.7 on September 7, 2016. It facedstiff resistance at higher levels and declined sharply to testthe month’s low at 8,558. The upward trend will remainintact as long as the index trades above 8,480. It cancontinue its rally towards its immediate target of 8,850 inthe short term. It is currently trading above the latest 100days Simple Moving Average (SMA) of 8,420. Majorresistance is at 8,720 and 8,850. Support is placed at 8,550and 8,480. A close below 8,480 will lead to furtherweakness to test 8,300.

Perumal RajaTechnical Analyst - Equity Research Desk

FundsIndia.com

HCL Technologies Ltd HCL Tech is currently trading in a symmetrical trianglecontinuation pattern. It needs to close above theresistance level of Rs 810 to trigger fresh upsidemomentum with target at Rs 880. Resistance is at Rs 810and Rs 855. Support is at Rs 760 and Rs 740. The latest50 day SMA is placed at Rs 782. Stop loss is placed at Rs735. It will turn bearish below Rs 735.

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

“Yesterday was a great day to start an SIP, today is a good to start, tomorrow is a good day to start.Whenever you have money you have to start an SIP.” - Nilesh Shah, MD of Kotak Mahindra Asset Management Company

www.fundsindia.com

1. Who has been appointed as the new MD and CEOof SBI Mutual Fund?

2. Which bank has become the first Indian bank todeploy software robotics for power bankingoperations?

3. Which stock exchange has become first Indian stockexchange to file Initial Public Offering (IPO) withSEBI?

4. Which Indian stock exchange has tied up withTwitter to provide live stock updates?

5. Which app is all set to revolutionize paymenttransactions on smartphones?

Please click here to submit your answers. You'll bedirected to a Google Form where you can enter theanswers to this month's quiz.

Answers for September 2016 Investment Quiz:

1. R.S. Sodhi 2. ICICI Bank 3. Urjit Patel 4. Assam

5. 6.5 per cent

The winner of the August 2016 Investment Quiz isGuruprasad Padubidri Janardhanachar.

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FundsIndia Select Funds Investment QuizEquity Funds - Moderate Risk

These funds tend to contain volatility better. They seek togenerate inflation-beating returns, and limit downside risks.The recommended holding period is five years.

Axis Equity ICICI Pru Focused BlueChipBirla SL Frontline Equity Invesco India GrowthBNP Paribas Equity Kotak Select FocusFranklin India Bluechip Mirae Asset India

Opportunities

Franklin India Prima Plus SBI BlueChipInvestco India Dynamic UTI Equity Equity UTI Opportunities

What is FundsIndia Select Funds: This is a listing ofmutual funds that we think are most investment worthy fora regular investor. We review this list on a quarterly basis.Do note, however, that past performance is not a guaranteeof future results. Please consider your specific investmentrequirements before designing a portfolio that suits yourneeds.

Please click here for a complete listing of our preferredfunds.