Do not forget the importance of asset allocation in building a weather proof portfolio

The equity market has been quite volatile for the past few months. What is your outlook on Indian equities from a long term investment (minimum 3 to 5 years) perspective?

Over the long term, India is on the cusp of an economic revival that will continue at least for the next two-three years kind of time frame. But over the near term, you may see that inflation will lead to an impact on profitability maybe over the next two quarters. Companies will gradually pass on the price increases to the consumers and get back to the normalized margins and therefore, normalized profitability.

The Nifty 50 index has corrected by nearly 14% (as on 15th July 2022) from its all time high. Are the current price levels of Nifty stocks attractive for long term investors? Please explain?

On the valuation front, if you look at the long-term average, the markets have come off from the highs to reasonable levels. This tells you that markets are not much in that expensive zone. Any decline from here will again be a great opportunity because that will make markets even cheaper than what they have been on average.

While passive investing is gradually becoming popular among retail investors in India, we think that there is not sufficient awareness about passive investments. For the benefit of layman investors, please explain the benefits of passive investments?

Passive investing aims to provide returns by imitating or replicating an index, such as the Sensex or Nifty 50. It has a relatively lower expense ratio due to low fund manager involvement. Passive investing involves less buying and selling by a fund manager. The goal of passive investing style is to replicate the benchmark index and generate returns similar to a benchmark index. Passive funds simply follow the index they use as their benchmark. Passive investing involves a relatively lower expense ratio. It offers returns that are in line with or does not exceed the benchmark.

Even among retail investors, who are aware of passive investments, we hesitancy about investing in ETFs. Some investors do not want to open demat account just for the purpose of investing ETFs and those who do, sometimes end up investing in stocks which may not be suited for their risk profiles. Some retail investors may not be comfortable transacting in stock exchanges. Are index funds or FOFs investing in ETFs suitable for such investors? Please explain?

Fund of Fund is an easy way to ride India’s growth story with a fund that provides exposure to the Nifty 50 Index. It offers the efficiency of an ETF with the convenience of an Index Fund. The underlying ETF fund tracks/ replicates the index. Investors can also do Systematic Investment Plan (SIP) and invest in small amount to gradually build their equity allocation.

Moreover, if one invests in FoF that invests in an ETF which directly invests in Index, then they automatically also get the benefit of low expenses, broader diversification, your client’s get consistency in investment style and market linked returns.

What are some of the other benefits of investing in FOFs investing in ETFs compared to investing directly in ETFs? Please explain?

Fund of Fund is an easy way to ride India’s growth story with a fund that provides exposure to the Nifty 50 Index. It offers the efficiency of an ETF with the convenience of an Index Fund. The underlying ETF fund tracks/ replicates the index. Investors can also do Systematic Investment Plan (SIP) and invest in small amount to gradually build their equity allocation.

Moreover, if one invests in FoF that invests in an ETF which directly invests in Index, then they automatically also get the benefit of low expenses, broader diversification, your client’s get consistency in investment style and market linked returns.

You are launching Nifty 50 ETF Fund of Fund. Please describe the salient features of this scheme?

In our continuous endeavour to make investing simple and offer you a one stop shop for all your solutions, we launched the Quantum Nifty 50 ETF Fund of Fund - a first of its kind Nifty ETF Fund of Fund on July 18, 2022.

This fund invests in units of Quantum Nifty 50 ETF Fund that in turn replicates the benchmark Nifty 50 Index and has a proven track record of 14 years and counting. It combines the efficiency of the Nifty 50 ETF with the convenience and flexibility of an index fund. This offers your client’s a simple and straightforward way to invest in equity mutual funds and achieve their wealth creation goals without having to stress about timing markets or worry about unforeseen circumstances.

Actively managed large cap funds category is one of the most popular mutual fund categories from a retail investor standpoint. Can active large cap fund investors consider Quantum MF Nifty 50 ETF FOF as an investment option? Please explain?

Allocation can be achieved in two ways, either you build it the active way through the active funds, or you could build it the passive way through passive funds. When you are going through the passive way, you have two options - either you can build your client’s core allocation in Nifty 50 through an ETF, or through a fund of fund that invests in the Nifty 50 ETF. ETFs are efficient vehicles, but with this fund we are offering investors at the other end, the convenience they are looking of an index fund. The Quantum Nifty 50 ETF Fund of Fund marries the two and gives you the best of both worlds.

Quantum MF’s 12:20:80 asset allocation strategy is well know. Please explain this strategy in brief for the benefit of retail investors. How can investors use Nifty 50 ETF Fund of Fund to build a portfolio based on 12:20:80 asset allocation strategy?

While it is a good time to invest in equity and balance/ rebalance your portfolio, do not forget the importance of asset allocation in building a weather-proof portfolio. Before you start investing, set aside at least 12 months of your monthly expenses for emergencies or other unknown expenses in a bank savings account or a liquid fund such as the Quantum Liquid Fund. Allocate 20% to the pure and portfolio diversifying asset of Gold that generally has a negative correlation with equities and generally performs better during periods of macroeconomic stress. Allocate with newer and efficient forms of this investment option such as Quantum Gold Fund ETF and Quantum Gold Savings Fund. Finally, ensure that 80% of your mutual fund portfolio is invested in a diversified equity portfolio, that is free from style or market cap bias.

If your clients choose to build a passive allocation, allocate 85% in the NFO - the Quantum Nifty 50 ETF Fund of Fund and initiate an SIP (Systematic Investment Plan) or lumpsum during the NFO period, and the balance of 15% in Quantum India ESG Equity Fund. The Quantum Nifty 50 ETF Fund of Fund gives your client’s portfolio an exposure to India’s top^ 50 companies across diverse sectors. For those interested in actively managed funds, you can suggest investing 70% of their equity bucket to Quantum Equity Fund of Funds. 15% of their portfolio can be allocated to Quantum India ESG Equity Fund. Invest the final 15% of their equity portfolio in the Quantum Long Term Equity Value Fund. Experience the magic and simplicity of the 12:80:20 allocation strategy through the asset allocation solution to simplify their portfolio allocation needs.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully