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MINIMISING THE CHANCE OF A LOSS

Fidelitys research shows that, historically, the longer you stay invested, the smaller the likelihood you will lose money and the greater the chance you will make money. This analysis (see table below) covers a period of over 26 years an looks at the different outcomes over one, five and ten year investment timeframes. The results are based on the returns from the BSE Sensex. The table shows that over 26 years from the end of 1983 to December of 2009, no matter when an investor had commenced an investment, they would not have made an overall loss provided they remained invested for 10 years or more. In contrast, investors who sold after five years would have run a risk of their investment declining in value, and selling after only one year would further increase the chance of a loss.

MADE money

LOST money

INVESTMENTS OVER: ANY ONE YEAR PERIOD OVER THE PAST 26 YEARS

% of 1 year periods where investors in Indian stock market

65.8%

Rs
34.2%
Average annualised return to investors in Indian

stock market: +23.77%

INVESTMENTS OVER: ANY FIVE YEAR PERIOD OVER THE PAST 26 YEARS

% of 5 year periods where investors in Indian stock market

88.1%

Rs
11.9%
Average annualised return to investors in Indian stock

market: +18.05%

INVESTMENTS OVER: ANY TEN YEAR PERIOD OVER THE PAST 26 YEARS

% of 10 year periods where investors in Indian stock market

98.45%

Rs
1.55%
Average annualised return to investors in Indian stock

market: +14.73%

So, the simple answer? The longer you can give your investments, the less the impact of short-term market movements. Note: You should be aware that past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and you may get back less than you invested. You may get back more or less than this as a result of currency fluctuations.

Source: Bloomberg, 31/12/1983 to 31/12/2009, BSE Sensex. Cumulative returns over 1, 5, and 10 years on all eligible time periods at one month intervals. Past performance may or may not be sustained in the future.

THE DANGERS OF MARKET TIMING


It can be tempting during times of stock market uncertainty to delay making investment decisions or to sell existing holdings in the hope of buying back in when values are lower. In theory this sort of market timing is an attractive plan, but it seldom works in practice. Just as the sharp falls in stock markets tend to occur over short periods of time, the best gains are similarly concentrated. Because these gains often occur just before, or after, a market fall - an investor who tries to avoid falls is highly likely to miss the best gains. Fidelity has analysed the returns from the Indian stock market over the period 2000-2010. The results show that missing just a few days of good returns can significantly impact overall performance.
Compounded annualised returns over 10 years effect of missing the best days
MARKET INDEX STAYS FULLY INVESTED 14.05% MISSED 10 BEST DAYS 5.75% MISSED 20 BEST DAYS 0.29% MISSED 30 BEST DAYS -4.23% MISSED 40 BEST DAYS -7.99%

INDIA

BSE Sensex

All figures show annualised, total returns, taken from 10 year period, starting from each consecutive month, from 30/06/2000 to 30/06/2010. Source: Bloomberg as at 30/06/2010. Returns of BSE Sensex have been used. Remember, indices are not a representation of a financial product - they do not take account of costs or tax and do not reflect the performance of any individual portfolio.

Missing the best ten days (equivalent to less than one day a year) has reduced annualised returns from all leading stock markets significantly. Missing the best 30 days (less than three a year) over a 10 year period would result in your investment losing money. Far from minimising investment risk, market timing is in fact a high risk strategy.

If your personal circumstances and investment goals have not changed, and you are still able to take a medium to long term view, then it is probably appropriate to sit tight through any periods of uncertainty. Remember time, NOT timing, is the key to investing. Fidelity only gives information about its own products and services and does not provide investment advice based on individual circumstances. If you are unsure whether an investment is right for you, you should contact a Financial Adviser.

This document must not be reproduced or circulated without prior permission. This article contains general information about the market and is being circulated for information purposes only and not for solicitation of business or trading purposes. Fidelity and the content providers of this article shall not be liable for any errors in the content or for any actions taken in reliance thereon. Risk factors: Mutual fund investments, like securities investments, are subject to market risks and there is no guarantee against loss in the schemes or that the schemes objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the schemes can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor or mutual funds managed by the Sponsor does not indicate the future performance of the schemes of Fidelity Mutual Fund. Statutory: Fidelity Mutual Fund (the Fund) has been established as a trust under the Indian Trusts Act, 1882, by FIL Investment Advisors (liability restricted to Rs. 1 Lakh). FIL Trustee Company Private Limited, a company incorporated under the Companies Act, 1956, with a limited liability is the Trustee to the Fund. FIL Fund Management Private Limited, a company incorporated under the Companies Act, 1956, with a limited liability is the Investment Manager to the Fund. Fidelity, Fidelity Investment Managers, and Fidelity Investment Managers and Globe Logo are trademarks of FIL Limited. CI01048