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Investor communication letter dated 19082011

Dear Investors,
Great time in the markets for people who are doing SIP’s or who still have lumpsum investments to do.
Most of you may wonder how can it be a great time when the markets are down around 16200 sensex and there is panic across the globe.
We should not forget that India is still a developing country and there is lots to go till we are a developed country.  Till a country is developing the GDP of a country is going to be on the growth trajectory and GDP is reflected in the stock prices and the SENSEX.  Though everything is priced in as per future earnings so if this financial year GDP is expected less, SENSEX already is down and if in the next financial year GDP Is expected up then SENSEX is again going to go up before the data is released.
But all this is a short term phenomenon.  Every 5 years the range of the SENSEX changes in the higher side because the rate of GDP growth in India is better than developed countries.  The more it stays in the lower range the better for SIP investors to accumulate MORE UNITS.  Just today I read that from 1990 – 2010 the rate of GDP growth was 6.6% per annum.  The SENSEX touched 1000 first time in July 1990 and currently it is 16000(P/E 18).  We are assuming a growth of 8% per annum for the next 10 years , our ministers even think of double digit growth; but even if we grow around 7% per annum due to high inflation etc. etc. historically we can easily become 8 times from here.  After discounting everything and being the most pessimistic, I am sure we can easily have a 4 times level of SENSEX from here in the next 10 years.  That’s better than any fixed return generating asset, if you get 4 times in equity diversified fund from here.  Historically equity funds have given 5 to 20 times returns in the last 10 years.
But we as investors never invest when the markets are going down.  Also we require liquidity from equity funds when that same liquidity can be had from other fixed assets.  When the markets are up we invest in hordes in equity shares and equity mutual funds.  When the market is down we run to average out shares which at the end become zero in value but do not average equity mutual funds which are professionally managed.  And then we blame the market for not giving us returns whereas long term investors who invest, average and forget equity mutual funds have been getting returns all the time in the past.
So start averaging good funds and do SIP’S for automatic averaging.
Those who are aggressive can go for 100% equity funds.
The risk averse can go for 20-30% equity funds(rest in debt) at this stage.
For any queries or for investing feel free to call me on 9825160807.
Thanking you,
Anand Nanavati (CERTIFIED FINANCIAL PLANNER
ARYA ADVISORY SERVICES
321, VISHWAMOHINI COMPLEX,
SUBHANPURA,
VADODARA – 390023.

Letter to investors on 28th june 2011

Dear Investors,
Time and again when the market is bullish we forget that over a period of time new blue chip stocks come into the picture and every rise in the market has some new stock which has propelled the benchmark indices.  But we as investors tend to purchase that stock which is most bullish at that point of time and we forget that every 5 years there is a new outperformer.
In 2007 people invested in hordes in Ambani brothers stocks be it RPL, Reliance Com, RNRL, RPower IPO. We know what happened next.  Along with that people invested in hordes in UNITECH, SUZLON when they were at peak.  Last year when markets touched highs in November 2010,  the same investors had become bullish on banks especially STATE BANK OF INDIA.
Please do not forget that leaders keep on changing.  It is your ability to spot the winners that would keep you ahead in terms of PER ANNUM returns.  It is very easy to look back and decide which stock to buy today but it is very hard to look ahead and decide when to sell that stock if at all it goes up from your purchase price.
Those of you who know me very well, know that I have dabbled in every possible strategy in the book but all that is not for retail investors.  If you want to take the risk for extra returns go for aggressive small cap funds(High Risk, High Return possible) instead of direct stocks.
2007 year will not repeat again and again that every listed stock would increase and everybody investing would become an analyst.  Do not forget the old saying:  Slow and steady wins the race.  Look back at your stock portfolio from 2005 till date and see if the whole portfolio is giving you % per annum gains more than 12% per annum.  Do not look at any individual stock.  Look at the total portfolio as a whole.  Mutual funds are easily giving you more than that return as a whole portfolio.  THEN WHY PLAY WITH YOUR MONEY AND INVEST IN STOCKS when you cannot decide the entry and exit of a stock.
Let me tell you again that I have played every rule of the game and learned the hard way that equity mutual funds are the best for any one who wants to get returns out of the share market.
NOW IT IS UPTO YOU IF YOU WANT TO LEARN THE HARD WAY OR INVEST AND GROW YOUR WEALTH THE EASY WAY.

Letter to investors on 1st Jan’ 2009(IN SHORT)

Coming back to our discussion, there are various theories but the main point is that future events are always reflected in the current market price which maybe why SENSEX and NIFTY is so down reflecting the future lesser than originally expected GDP numbers and future lesser company’s profits. This bear market is such a topic that can go on for hours and hours but we shall cut down to the moral of the past decade stories.  I would like to take you in the past. Only SENSEX levels are given. For details of why SENSEX increased/decreased you can come to my office.  I have got the details in a compilation.
Date
SENSEX
Reasons
9th oct 90
1559
Balance of payment crisis in 1990-91
25th jan 91
956
so fell 40%
22nd apr 92
4467
Harshad Mehta scam so fell 54%
26th apr 93
2037
11th feb 00
5934
Y2k bug euphoria
21st sep 01
2600
Jan-08
21000+
Subprime mortgage related US bankruptcies
Low
?
     In all the above scenarios anyone who has invested even 10 to 20% above the lows of the market are in good profits even now.  Risk – reward ratio is good for investing. This is the BEST time to invest.  Invest in good INDEX based funds.  INDEX based funds are passively managed and so also attract lesser entry loads. They just track the index.  Or just buy a NIFTY FUTURE when NIFTY goes below 2500(But do keep margin for 1000 points). You will get 3-5 times of your investment when the market bounces back to NIFTY LEVEL OF 7500.
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