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Question: You have a preference for companies that generate healthy operating cashflow and free cash flow. Why do you emphasize this factor?

Question: How do you define value? Which are your preferred metrics of value?

I was told I could address any of the following four questions in my article. But why stop at one if you can go for all four?  Especially if all four are linked inexorably in some form.

The questions and the corresponding answers are below -

As the parent of two teens I have seen them evolve over time. From the joys of the new born who holds you tight it is quite an eventful journey till they get to adulthood and spread their wings. Having just been to my elder child’s graduation (12th standard) and with adulthood now just a few days away it has been quite a satisfying journey.

UTI Equity fund has a strong predilection towards investing into businesses that have strong and steady profile of free cashflow generation, high RoCEs through the cycle and a high visibility of long term growth.

What comes to your mind when you think of making investments for future needs?

You like the sound of the ping on your mobile phone informing when pay gets credited every month. But how can you ensure that the sweet sound continues even in retirement? You will still need a regular income to meet your regular expenses. That’s not all.

Numerical examples explaining the methodology of calculating the subscription price of units:

1. Sale Price - Ongoing price

Ongoing price for subscription (purchase)/switch-in (from other Schemes/plans of the mutual fund) by investors.

Purchase Price = Applicable NAV (for respective plan and option of the scheme)

Example: An investor invests Rs. 10,000/- and the current NAV is Rs. 10/- then the purchase price will be Rs. 10/- and the investor receives 10,000/10 = 1000 units.

“Change is the only constant” is an adage which applies perfectly to not just the macroeconomic environment but also to the equity markets in general. Behind every ‘fall in the market’ there will always be some events just as behind every ‘rally in the market’ there will be other events.  It is the circle of life for markets. At some point the markets will get over-valued, events seen as negative will happen; resulting in markets getting “de-rated” and dropping into the “cheap” zone.

Asset allocation: The on-going equity market drop once again highlights the need for investors to follow a prudent asset allocation strategy. Every asset class goes through cycles. Equities are a volatile asset class with attractive long term returns. Similarly fixed income returns can be attractive over shorter time periods though over the longer term it typically lags equities. This reinforces the need for asset allocation in order to manage risk and optimize returns.