INVESTMENT BASICSMunoth Financial Services Limited

Investment objectiveWhile you invest your hard earned money, your objectives should ideally be to

Maximize profits. Earn much more than the prevailing rates of inflation

Safeguard capital by reducing risks of capital erosion, reduction in profits or dead investments

Ensure quick liquidity or easy leverage option for meeting any adversities

Avail tax advantages, if possible

Risk reduction approach to investmentsInvestments in equity and equity related investments while offering great potential for high returns also poses market risks which can be lowered systematically by a proper diversification approach and careful selection of stocks.

Approach to investments

• Invest only in companies with a consistent and good track record, say a over 15% y-o-y growth in profits and sales over last 3 years.

• Timing the purchase and maintain restraint and caution while buying stocks at or nearing their peaks.

• Booking profits at opportune time and not too early.

A disciplined and systematic approach is quintessential for successful investing. As investor you need to at the least imbibe some rules to preserve your wealth:

Given the unpredictable nature of stock markets, investing in equities require• Solid experience• In-depth knowledge of various businesses and economic factors• Time devotion for analysis• Constant monitoring, as markets are dynamic

Investment PrinciplesAlmost any lay investor would do well during a bull run. But what really separates the intelligent investor from the rest is his ability to minimize losses during market meltdowns. So what can you do to be resilient during times of trouble? Here are some suggestions:

Do not buy into short term market fads with the lure of quick gains.

Buy quality businesses that have shown buoyancy across economic cycles.

Do not overpay.

Sell stocks if the fundamentals deteriorate or valuations go up to insane levels.

THE FACT REMAINS THAT“the desire to grow money is a natural instinct. But as simple as the desire is, the process to do so is just as complex”.

What suits you – Mutual Fund or PMS account or direct investments?

If you are a small investor and your total investment corpus is less than INR 25 lakhs, you should opt for investing thru mutual funds. There are many mutual funds catering specifically to various asset classes or industries. There are some balanced schemes which invest both in equity or debt. You should check the performance of the fund manager and the mutual fund company before deciding on your investments.

If you are a small investor and aiming at very long term investments, you may also consider direct investments provided you have knowledge and wherewithal to identify dark horses. You will have to exercise caution and discipline while taking investment calls.

If your investments are beyond INR 25 lakhs, investing thru a PMS account will be a better option for you. A customized management of your funds will give you the advantage to investing in sync with what suits your expectations. As your investment is sizable, it is vital for you to allow professional to take informed calls for you rather than you yourself taking decisions. Your systematic risks in PMS account is to a large extent reduced because of careful selection of stocks, better timings, balanced investing approach and so forth.

Benefits of a PMS account

Scientific investment decisions curbs wrongful investing and consequential capital erosions

Expertise of fund managers enables investments in high growth potential entities

Transparency and stringent SEBI regulations ensures safety and accountability. It further acts as a safety net.

Timely reviews and periodic updates keep you under full knowledge on performance of your investments.

Customized plan drawn for you is based on your risk profile and aptly addresses your risk, return and liquidity aspects.

PMS offerings by MFSLMFSL offers customized offerings for its client. We begin with understanding your existing demographic profile, investment patterns, nature of business and so forth. And based on your assessment, we will recommend / advice on following aspects:

Size of your Portfolio account. Plus, planned additional add-on investments quarter on quarter.

Type of Portfolio account you should open. PMS is broadly offered as discretionary and non-discretionary. In discretionary module, the investment decisions are solely taken by portfolio manager while in non-discretionary module, the recommendations are made by Portfolio Manager but the final decision rests with the clientele.

Where to allocate your investments? Debt & money market, Equity & equity related others. Various risk parameters which needs to be addressed are Industry risks, Performance risks, Management risks, Leverage risks, Valuation risks

How to decide allocations within equity instruments?

Our 4 steps approach

A methodical approach should start with building universe of stocks based on a filtration criterion followed by wholesome analysis on basis of which investment decisions are taken.

Investment decisions are to be governed by preset maximum and minimum exposure levels. A continuous monitoring is essential for successful management.

Defining rules for investments

Exposure in small cap stocks: We recommend around 20% of your corpus for investments in small cap companies with promising growth prospects, sound balance sheet and strong management backing them up.

Allocation based on market capitalisation: It is good to balance out your portfolio between small, mid size and large companies. About half of your corpus should ideally be in large companies.

Limit over exposure: We recommend avoiding over 15% exposure of your corpus in any single entity and over 30% corpus in any single industry.

Selection of companies: Apart from performance track records, your selection for companies should be based on entities run by quality management, and those placed at highly competitive advantage.

Avoiding highly leveraged entities: It is good to avoid or further probe before investing in companies which are highly leveraged or where the promoter’s have pledged their holdings.

Entry Price: PE multiple needs to be compared with earnings growth to determine whether it is wise to buy. Some times PE may appear high but in comparison to its growth may make a sound investment.

Munoth Financial Services Limited

MFSL has over 15 years of experience in providing Portfolio Management Services since 1999. The company periodically invests in technology to ensure that its customers get access to seamless, secured and quick service. The management’s rich experience is well complimented by its qualified, experienced and trained manpower.

MFSL is promoted by a century old Chennai based Munoth group. The company also offers Merchant banking, Stock broking & dematerilisation services and Mutual fund & IPO distribution. It caters to institutional, corporate, HNI’s and retail clienteles.

MFSL, appointed by IL&FS, is also the investment manager of Valmark Infra & Realty trust, a category II Alternate Investment Fund.

For more information log on to www.munothfinancial.com

Concluding RemarksThere is nothing like a winning stock portfolio which you can create, sit back and relax to eternally enjoy the rewards of your wise choices. Markets are very dynamic and so a successful investing requires constant monitoring, review and churn in order to generate best possible returns and also to safeguard corpus depletion.

Given the flood of liquidity in the Indian stock markets and the high optimism among investors following the change of leadership at the Centre we firmly believe that a major bull run in the Indian stock markets could probably be underway. And this could go on for some years and create solid wealth for investors.

In the past too we have witnessed prolonged structural bull runs. Investors indeed saw their stock portfolios swell. But like all human excesses, the bull runs eventually overstretched to dizzying levels of optimism. Then they lost steam; panic followed, markets crashed and investors lost the bulk of their gains. In many cases, investors even saw their capital erode.

We should never forget that “The success lies in selling stocks when they go up to insane levels”.

Statutory InformationInvestment is subject to market risks. You are advised to read the disclosure document before opening a Portfolio Management Services [PMS] account.

MFSL is a SEBI registered PMS provider since 1999.

Registration details

Depository Participant IN – DP – NSDL – 3-0-97Merchant Banking INB000003739NSE CM INB 230803634NSE Derivative INF 230803634PMS INP000000308MAPIN 1000002089

CIN L6599TN1990PLC019836

Registered officeMunoth Financial Services LimitedMunoth Centre, 3rd Floor, 343 Triplicane High Road, Chennai 600 005. +91 44 2859 1185, info@munothfinancial.com , www.munothfinancial.com