Equity Through Mf, Sip

Equity Investment Through

Mutual Funds

Agenda

• Why Save • Why Save through Equities • Why Equities through mutual funds • Why Systematic Investment Plan

Why Save?

• B’cos the cost of living is Ç… •

1983

2003

2023

•

Toothpaste

Rs.4

Rs.20

Rs.100

•

LPG Gas

Rs.27

Rs.250

Rs.2315

•

Education

1000’s

100,000’s

?

Why Save? •…while sources of revenue are È •Age 25

Start career

100% dependent on job

•Age 30

Marriage

•Age 40

Buying a house

•Age 55 •

Children’s Education/ Marriage

•Age 60

Retirement

100% dependent on earnings from investment

Are your savings earning you enough?

Inflation assumed @5% p.a Returns assumed @9% p.a.

•

Ram, 30 yrs

• •

Present monthly spending:

Rs. 15,000

• •

Estimated monthly spending at 60:

Rs. 65,000

• •

Accumulation required at 60:

Rs. 85 lakhs

Reality Check… •

Falling rates will reduce the net accumulation from traditional Investment avenues

•

Age: 30 yrs; Annual savings: Rs.40,000; Increase in Annual Saving: 5% Rs.85.0 lakhs

Accumulation at 60 Rs.71.4 lakhs Rs.60.1 lakhs

9%

Rs.50.9 lakhs

8% 7% 6%

Savings(Wealth creation)– Basic Principles…(1) •

Start early… Value at the age 60 Rs.17.45 lakhs

Rs.12.97 lakhs

Ram: Rs.1 lakh invested at the age of 30

Shyam: Rs.5 lakhs invested at the age of 50

Returns: 10%

Power of Compounding

Savings(Wealth creation)– Basic Principles…(2) •

Save regularly…it all adds up! 25

Rs.21.7 lakhs Rs.1000 invested every month for 30 years @10%

Rs. Lakhs

20 15 10 5 0 1

5

9

13

17

21

25

29 30

No. years

A small amount invested regularly can grow to substantial lumpsum

Savings(Wealth creation)– Basic Principles…(3) •

Earn more…it can make a big difference

One time investment of Rs.1 lakh invested for 30 yrs

@ 6%

@ 10%

@ 15%

5.7 lakhs

17.45 lakhs

66.2 lakhs

OR Wealth Creation Principle is nothing but Enhancement Of future Value.

Enhancing Future Value •

Wealth creation is nothing but enhancement of future value

n n • FV = PV PV (1 + rr ) The more you save, makes a difference

The more you earn, makes a difference

The sooner you start, makes a difference

How to enhance Future Value in the Long run ?? • Starting Early & Saving Regularly helps in wealth creation but the most important part in wealth creation are the returns & EQUITY is the only asset class which has a potential to generate higher returns in the long term………

BUT PEOPLE OFTEN LOOSE MONEY IN EQUITY ………

Why People Loose money in Equity ?

T h e c y c le Fe a r

o f fe a r,

g re e d

a nd

G r ee d

hope H o pe

Z u ri ch

I n d ia

M u u t a l F u nd

Investors gets trapped in the Cycle of fear , greed and hope

Simply put …

Other Reasons of Failure •

Equity Investments are made on Tips & Flavors

•

Equity Investments are tracked part time & not full time

•

Equity Investments are made for short term

•

Equity Investments are not adequately diversified

•

People look at acquisition price & not future value

Wealth Creation MANTRA

To break the cycle of Fear,Greed & Hope & become a successful equity investor one should START

WHY !!!!

Why Equity Mutual Funds are successful? Qualities

Description

Does a mutual Do fund you have ? have it?

A systematic method of selection of the scrips, with the synchronization of objective.

??

Yes

Infrastructure

Technology, information at hand, statistical tools, research team, time etc.

??

Yes

Experience

The experience of making investment decisions on a regular basis & experience of standing all the business/economy cycles.

??

Yes

Investment process

Why Equity Mutual Funds are successful? Qualities

Knowledge & qualification

Description

Most Fund managers are professionally qualified. Moreover, their knowledge is assisted by a lot many support which they get in the form of their research team, study etc.

Reviewing & analyzing your Constant monitoring investment at every moment of time .

Does a mutual Do fund you have ? have it? ??

Yes

??

Yes

Why

Systematic Investment Plan?

What is Rupee Cost Averaging / SIP •

We call it Disciplined Regular Investment

•

Science, Art or A Habit?

•

The Markets are volatile: they move up and down in an unpredictable manner

•

Invest a fixed amount, at regular, predetermined intervals and use the market fluctuations to your benefit

•

How does it help you: – You buy more more when the market is down – You buy less when the market is up – Over time the market fluctuations are averaged – Most likely you will realise a saving on the cost per unit – This leads to HIGHER RETURNS

Power of Compounding - QUIZ • Rs. 10,000 invested every month for a period of 30 years At 8% -

At 15% -

At 20% -

1.5 crores

Postal Recurring

7.0 crores

SIP in Balance Funds

23 crores

SIP in Equity Funds

Working of SIP in any kind of market Month

Amount Invested

Rising Market

Falling Market

Volatile Market

NAV

Units Alloted

NAV

Units Alloted

NAV

Units Alloted

1

1,000

10

100.00

10

100.00

10

100.00

2

1,000

12

83.33

8

125.00

12

83.33

3

1,000

14

71.43

6

166.67

8

125.00

4

1,000

16

62.50

4

250.00

10

100.00

Total

4,000

52

317.26

28

641.67

40

408.33

Average Purchase Price

13

7

10

Average Cost Per Unit

12.61

6.23

9.80

Past Performance (BSE Sensex)

In past

Year

Sensex

Investment Rs.

1979

100

1,00,000

2006

13,000

1,30,00,000

27 years BSE Sensex has given about 19.5% returns

This is in spite of … • Two wars • At least 3 recessionary periods • At least three major financial scandals • 10 different governments and • Assassination of 2 prime ministers • An unfair share of natural disasters

Years

YEAR END

SENSEX level

1 year

3 years

0

31-Mar-79

100.00

1

31-Mar-80

128.57

28.57%

2

31-Mar-81

173.44

34.90%

3

31-Mar-82

217.71

25.52%

29.61%

4

31-Mar-83

211.51

-2.85%

18.05%

5

31-Mar-84

245.33

15.99%

12.25%

5 years

7 years

10 years

15 years

19.66%

6

31-Mar-85

353.86

44.24%

17.58%

22.44%

7

31-Mar-86

574.11

62.24%

39.49%

27.05%

28.36%

8

31-Mar-87

510.36

-11.10%

27.66%

18.58%

21.77%

9

31-Mar-88

398.37

-21.94%

4.03%

13.50%

12.61%

10

31-Mar-89

713.60

79.13%

7.52%

23.81%

18.48%

21.72%

11

31-Mar-90

781.05

9.45%

15.24%

17.16%

20.52%

19.77%

12

31-Mar-91

1167.97

49.54%

43.12%

15.26%

24.97%

21.01%

13

31-Mar-92

4285.00

266.88%

81.76%

53.04%

42.80%

34.71%

14

31-Mar-93

2280.52

-46.78%

42.93%

41.76%

21.78%

26.84%

15

31-Mar-94

3778.99

65.71%

47.90%

39.57%

33.11%

31.45%

27.40%

16

31-Mar-95

3260.96

-13.71%

-8.70%

33.09%

35.03%

24.87%

24.05%

17

31-Mar-96

3366.61

3.24%

13.86%

23.58%

24.81%

19.35%

21.86%

18

31-Mar-97

3360.89

-0.17%

-3.83%

-4.74%

23.18%

20.74%

20.02%

19

31-Mar-98

3892.75

15.82%

6.08%

11.29%

18.77%

25.60%

21.43%

20

31-Mar-99

3739.96

-3.92%

3.57%

-0.21%

-1.92%

18.02%

19.92%

21

31-Mar-00

5001.28

33.73%

14.17%

8.93%

11.87%

20.40%

19.31%

22

31-Mar-01

3604.38

-27.93%

-2.53%

1.37%

-0.67%

11.93%

13.03%

23

31-Mar-02

3469.35

-3.75%

-2.47%

0.64%

0.89%

-2.09%

13.63%

24

31-Mar-03

3048.72

-12.12%

-15.21%

-4.77%

-1.41%

2.95%

14.53%

25

31-Mar-04

5590.60

83.38%

15.76%

8.37%

7.54%

3.99%

14.71%

26

31-Mar-05

6492.82

16.14%

23.23%

5.36%

7.58%

7.13%

15.16%

27

31-Mar-06

11279

73.71%

54.66%

25.62%

17.08%

12.85%

16.32%

10/27

5/25

3/23

3/21

1/18

0/13

Probability of Loss

Selecting Right Asset Class Equity market (represented by BSE Sensex) has outperformed all other investment avenues 6,000

Sensex

5,000

Bank Deposits

Company Deposits

4,000 3,000 2,000

Inflation

1,000

Gold

0 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 200491

92

93

94

95

96

97

98

99

00

01

02

03

04

05

A Snapshot of poor performing schemes Scheme Name Pru Tech Fund Alliance New Millenium

Amount Invested through SIP(Rs. 1000 p.m.) from March 2000 61,000 61,000

Current Value As on 31-03-2005

SIP Returns

105,930

22.06%

106,347

22.22%

Amount Invested One Annualised Current Value Time Returns Pru Tech Fund

61,000

41,480

-7.34%

Alliance New Millenium

61,000

33,673

-11.08%

A Snapshot of better performing schemes Amount Invested through SIP(Rs. 1000 p.m.) from March 2000

Current Value As on 31-03-2005

SIP Returns

HDFC Equity

61,000

161,209

39.69%

Reliance Growth

61,000

226,349

54.64%

Scheme Name

Amount Invested One Annualised Current Value Time Returns HDFC Equity

61,000

146,501

18.90%

Reliance Growth

61,000

167,023

22.02%

UKD809_26817_7 FINAL.qxd:_

11/14/08

3:15 PM

Page 1

SecurePlus is Business Partner with

We’re here to help SecurePlus has a long history of helping people meet their financial goals.We have a reputation for developing innovative investment products and we pride ourselves on providing clear information to help you make your investment decisions. As an independent company, we are free to concentrate on the best interests of our investors. And throughout our history, we have focused single-mindedly on investment, rather than expanding into other financial areas. If you are planning for your future, you may want to talk to a financial adviser. If you would like copies of any of our free guides about key investment topics, reach us at

Risk Factors: • Mutual funds, 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/the AMC/the Mutual Fund does not indicate the future performance of the Schemes. Please read the offer document/scheme information document/statement of additional information of respective schemes before investing.

Happy Investing !!!