LONG-TERM INVESTING THROUGH THE CYCLE

THE

WORLD'S

MUTUAL

FUND

MANAGER

GOOD THINGS COME TO THOSE WHO WAIT

In the short term, investing can often seem a largely random exercise, where success or failure is determined by a combination of factors _ many of which are beyond our control.

Over the long term, successful investing can be achieved by adherence to a small number of easily understood guidelines such as diversification and seeking expert advice. The cardinal golden rule for investing is the knowledge of how time can impact investment risk and performance, and allowing sufficient time for your investment strategies to achieve their potential.

DIFFERENT INVESTMENTS CARRY DIFFERENT RISKS

When deciding how to invest your money, there are many choices available. Most funds offered by professional investment managers like Fidelity invest into one, or a combination, of three major categories _ cash, bonds, or equities. Each of these investments carries a different level of risk, but also different levels of potential return. The table below provides a basic guide to the characteristics of each.
Cash Safe, liquid deposits that pay a regular rate of interest _ bank savings account. Bonds Certificates promising that the issuer will pay the investor an income as reward for lending them capital. Low-Med Low-Med 3 years Equities Shares in companies aiming to achieve profits on behalf of shareholders.

Risk Potential return Suggested minimum investment duration

Low Low Short-term

High High 5 _ 10 years

Theoretical risk/return trade-off of major asset classes

Potential return

Cash

Bonds Risk/Volatility

Equities

If you are primarily invested in cash or bonds, then stock market wobbles may be of little consequence. If, however, the majority of your portfolio is invested in equity funds, then any stock market volatility may impact the short-term performance of your holdings. The important factor to consider is whether your investments are aligned with your risk tolerance, your time horizon, and your individual goals.

DIFFERENT INVESTMENTS FOR DIFFERENT GOALS

Matching your investments to your goals is fundamental to success. If you are saving for a long-term goal such as your childrens education or your retirement, then equities may be an appropriate strategy and short-term fluctuations in equity prices may be of little consequence to your overall plan. If your goals are more immediate, such as a holiday or a new car, then equities may not be appropriate for your needs and you may wish to consider investing primarily in bonds or cash. Because everybodys situation is unique, the best course of action is to discuss your options with your Financial Adviser.

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 25 years and 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 25 years from the start of 1983 to September of 2008, 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 25 YEARS

% of 1 year periods where investors in Indian stock market

68.12%

Rs
31.88%
Average annualised return to investors in Indian

stock market: +24.51%

INVESTMENTS OVER: ANY FIVE YEAR PERIOD OVER THE PAST 25 YEARS

% of 5 year periods where investors in Indian stock market

88.0%

Rs
12.0%
Average annualised return to investors in Indian stock

market: +18.05%

INVESTMENTS OVER: ANY TEN YEAR PERIOD OVER THE PAST 25 YEARS

% of 10 year periods where investors in Indian stock market

98.42%

Rs
1.58%
Average annualised return to investors in Indian stock

market: +15.67%

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, 31/12/1982 to 30/09/2008, 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 1998- 2008. 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 15.27% MISSED 10 BEST DAYS 7.79% MISSED 20 BEST DAYS 2.39% MISSED 30 BEST DAYS -2.06% MISSED 40 BEST DAYS -5.72%

INDIA

BSE Sensex

All figures show annualised, total returns, taken from 10 year period, starting from each consecutive month, from 30/09/98 to 30/09/2008. Source: Bloomberg as at 30/09/08. 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 40 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.

TIME IS ON YOUR SIDE

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. Please read the offer document of the schemes before investing. 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 International and Pyramid Logo are trademarks of FIL Limited. CI01048