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Ensure Right Advice For Your Money (February 2007)     Past Performance & Ratings - That's not enough     If past history was all that there was to the game, the richest people would be the librarians - Warren Buffet ‘Winners Rotate’ and that’s true when it comes to equity fund selection. Just by picking the top performers of last 6 months or 1/3/5 years and investing in them may not be sufficient. Check out our analysis in our January '07 Aurum on ‘Winners Rotate’ wherein we have shown the top 25 funds over 7 market phases. You wont get even a single fund which has been a consistent top performer. Also investors try to read various magazines & journals to identify the top performing funds. One of the most prominent magazines for mutual funds gives 1 star to 5 star ratings across funds. Investors fail to realize that these ratings are based on past performance and are in no way indicators of future top performance. For example: • Franklin India Prima Fund (5 star rating – 2 year back). We didn’t recommend this fund in the last 2 years and also suggested to exit it. And in the past 1year it is the worst performer in the midcap category due to an unmanageable corpus size. In the past 1 year Franklin Prima has generated just 20% returns whereas all other midcap funds have generated returns in the range of 25-50% Last month its rating has come down to 4 stars. • Sundaram Select Midcap (3 star rating – 2 year back). We heavily recommended it since the past 2 years and it was the topmost performer. It got 5 star rating in March ‘06. It also got CPR1 rating recently from CRISIL. In July’06, we had stopped recommending this highly successful fund and it has already started underperforming vis-a-vis other midcap funds. Last 6 months returns 29% whereas other midcap funds have generated 30-49% returns. • Pru ICICI Dynamic (1 star rating since quite long). We recommended this fund since 1- 1½ year & it’s among consistent toppers since then. Now the 1 star rating will go up. Huh! That’s what we said in our July ‘06 Aurum, it has recently got 2 star rating, but we are sure it will go further up. • Reliance Regular Savings Fund (our March ‘06 recommendation) is ‘not rated’ at all. In the past 11 months, Reliance RSF has been the best performer. After 2 years when it will perform consistently, it will get a very high rating. Right? We were the first in India to start recommending this fund. Moneycontrol.com has given a 5 star rating to this fund in Sept ‘06. To cut the long story short… All magazines & websites show best performers based on past performance. We recommend ‘Future Winners’ based on our rigorous study & expertise in picking best future performers. And that’s what is most important for your wealth creation, as your investments are concerned with future growth & not past performance.   "Investors of today do not profit from yesterday's growth" Also some investor’s portfolios are spread across 15-20 funds. We suggest you not to invest in anything and everything during NFO’s & when dividends are declared. You should have 5-10 funds in your portfolio at any point of time which are expected to perform best going forward - The FUTURE WINNERS!     Expert Advisor is the key to wealth creation     In India, to start practicing as a financial distributor is not that difficult. The entry levels are easy. Many incompetent so-called advisors, do this as a business and not as a profession. Also, investors in India look at financial instruments as products. They try to get rebates out of the distributor’s commission. Investors feel happy if they succeed in getting good rebates, but they tend to miss on some untold facts. Distributors get variable commissions from various mutual fund houses & sometimes variable commissions on different equity funds of the same fund house. The modus operandi is simple; Inferior funds shell out more & good funds shell out much lesser commissions. When an investor comes to a distributor for higher rebates, the distributor smartly advices him a fund where he gets more commission and passes out, maybe, a part of it to the investor. The distributor ends up earning more, and the investor is happy. Win-win situation, isn’t it? But if the investor checks the performance of this fund after 6 months or 1 year, he would be surprised to see that there are many funds which delivered as much as twice the returns (in last 12 months, returns generated by over 100 funds vary from 2-55%). So, has the wise investor who got rebate actually been wise?   "Price is what you pay, value is what you get " Investors should realize that distributors have to pay 12.5% service tax, 33.66% income tax (including surcharge and education cess) and also bear huge office expenses including staff salaries etc. And if he is asked to give away rebate too, be sure you got advice of an inferior quality scheme which will under-perform vis-à-vis other many funds available. So check your Equity MF Portfolio: –  Check whether your Equity Funds after 6-12 months from date of investment feature atleast in the first 50% from the date of investment, out of the overall available funds. If they are featuring in the first 25% category, then you are getting the best available advice. The comparison must be done from the date, of your each investment till date for each fund invested. And if they don’t feature in the first 25% or even in the first 50%, Please Think... –  On what basis had you selected that fund expecting it to be the best? –  Had your advisor recommended that to you? Ask that advisor to explain the reason for under-performance. Invest through us and generate best returns: –  We believe in educating investors about markets, right fund selection, right & wrong practices prevailing, etc. Do read Aurum (our monthly magazine) always. It has immense wealth of information. –  Ask for our latest recommended funds at the time of your investment. –  We regularly urge you via Aurum & Emails, to send us your portfolios for our recommendations on it. –  Believe it or not, Reliance Regular Savings Fund (strongly recommended in our March ‘06 Aurum) which is among topmost performers since the last twelve months has the least commission payable to us among over 100 diversified funds. But we don’t care for that small lower commission. To us, your wealth creation comes first, as we believe that would multiply your trust in us. We believe, that’s a win-win situation. –  As it is indeed very important to invest in 'FUTURE WINNERS' and not just go by past performance at the time of investing, its equally critical to exit the Equity Fund before it starts underperforming. In July'06 we recommended to QUIT a highly popular midcap fund 'Sundaram Select Midcap', and recommended investing in another midcap fund SBI Global, and in last 6 months Sundaram Select Midcap has heaviliy underperformed. In last 6 months Sundaram Select Midcap has generated 29% appreciation whereas SBI Global topped the chart with 49% appreciation. Now think, is the miniscule rebate more profitable or the best returns? At BrainPoint we have many examples to prove that our Equity Fund recommendations always proved to be "FUTURE WINNERS". Do visit us today for the best advice... always. Risk Factors : Please refer the offer document before making any investment decision. Past performance may or may not be sustained in the future.

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