Sip

Mutual Funds by

Kiran Nadkarni Contact : 98812-67057 Mail : [email protected]

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Where can one invest ?? • Postal Savings • RBI bonds / GOI bonds ( G secs ) • PSU/ F I bonds - NHAI/ REC/ NABARD/ IDBI / ICICI etc • Fixed Deposit - Bank / Co • Shares & Stocks , Derivatives • Commodities • Real Estate 2

Key Investment Considerations Liquidity Safety Your money is managed by experts

You get your money back when you want it

Plus Convenience How easy is it to invest, disinvest and adjust to your needs?

Post-tax Returns How much is really left for you post tax?

• •

For the same liquidity - higher the safety, lower the returns For the same safety - higher the liquidity, lower the returns 3 Mutual Fund investments are subject to market risks Please read the offer documents carefully before investing.

MFs offer all of above Liqu idity Conv eni enc e Ri sk Diversi ficat ion

Flexi bili ty Tr an sp are nc y Re gulat ed

Plus

Ta x Most ben ef Funds its Disclosure Most allowing ofopen Mutual ended funds switching Diversified Easy to Portfolio Funds redeem between Capital invest portfolio areand within easy funds. leads Ga insto NAV regulated 1declared working redeem to risk by SEBI. day. From Ta x- free debt control daily to Dividen equity ds etc.

Ta x bene fits 4

Financial Planning for the future……... Income Phase I

Phase II

Phase III

Children’s Marriage Child Education Housing

Children Marriage 22 yrs

38 yrs

Birth & Education

Earning Years

22 yrs

Over 25 - 30 yrs

Retirement Age 60 yrs 5

Cost of Living Items Colgate toothpaste

1987 ( Rs ) 8.05

( 100 gm tube )

1997 ( Rs. ) 18.90 ( 8.91 % )

Hamam Soap

3.05

7.85 ( 9.92 % )

Masala Dosa

3.50

14.00 ( 14.87 % )

Petrol

7.99

( per litre )

25.48 ( 12.30 % )

L P G Cylinder

56.15

137.85 ( 9.40 % )

Zodiac men’s shirt

225.00

510.00 ( 8.53 % )

Source : Readers Digest – Nov 1997

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Cost of Living 2017 ( Rs. )

Items

1997 ( Rs )

Colgate toothpaste

18.90

104.00

7.85

52.00

Masala Dosa

14.00

224.00

Petrol

25.48

259.12

L P G Cylinder

137.85

830.85

Zodiac men’s shirt

510.00

2620.27

( 100 gm tube )

Hamam Soap

( per litre )

Assuming inflation to grow at the same rate during 1987-97

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INFLATION ROBS YOUR PURCHASING POWER (Assuming inflation @ 8% p.a.) Rs. 10,000 today

217,200

100,600 46,600 21,500

10 years

20 years

30 years

40 years

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Why equities are the best bet for long term. …. 25% 20.16%

real growth = growth - inflation

20%

14.47%

15% 10%

9.19%

10.97%

9.74%

7.62%

5.28%

5% -1.57%

0% Inflation

Gold

0.55% Bank FD

Company FD

Equities

-5%

Source : RBI Report(1997-98) Analyzed on 15 Year Data 9

EQUITIES ARE THE BEST LONG TERM BET % OF STUDIED PERIOD IN WHICH Other investment outperformed

44%

37%

56%

63%

14%

Stocks outperformed

1 year

3 year

Source : RBI Report on Currency and Finance (1997-98) BSE Sensitive Index of Equity Prices - BSE

86%

5 year

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EQUITY = LOSS ? SENSEX 1991-2006 IT IS UP 90 TIMES IN 26 YEARS ^

Source : Bloomberg

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^ Since BSE Sensex Inception to June 13,2006

EQUITY = WEALTH

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EARNINGS DRIVE RETURNS COMPANY

CAGR PAT PRICE 10 YRS

10 YRS

Reliance

22%

26%

SBI

20%

18%

Bharti

333%

62%

Infosys

65%

73%

Ranbaxy

16%

23%

HLL

20%

12%

ITC

27%

24%

Tisco

22%

10%

Hero Honda 46%

45%

HDFC

25%

20%

INVESTING

ASK

IS SIMPLE

TWO QUESTIONS?

WILL

THESE COMPANIES BE

THERE TEN YEARS FROM NOW

IF

YES,WILL PROFITS THEN

BE HIGHER THAN TODAY? 13

MUTUAL FUND = LOSS ?

Prudential ICICI Growth Plan 1999-2006

NAV IS UP 6 TIMES IN 8 YEARS From Jan 1,1999 to June 9,2006

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Past performance is not an indicator of future performance. It may or may not be sustained in the future

What Is Mutual Fund ? • Collective vehicle of investment • Its common pool of money into which investor place their contributions that are to be invested in accordance with stated objective. • By Structure it is Trust registered under Indian Trust Act and Sponsored by Promoters • Highly regulated by SEBI

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How does a Mutual Fund work?

AMC

Savings Trust

Investments

Units Unit holders

Registrar

SEBI

Trust Custodian

AMC

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WHY Mutual Funds ? • Professional Management of Funds • Diversification – Reduces Risk • Convenient Administration – Less Paper Works, Bad Delivery,delayed payments etc • Low transaction cost : Enjoys Scale of economy • Highly Liquid – Easy Purchase / Sale 17

WHY Mutual Funds? Contd. • Highly Transparent – Declaration of portfolio on monthly basis • Flexibility – SIP/ SWP / Div / Gr etc • Highly regulated – SEBI / RBI • TAX efficient – div are Tax free • High Level of Service Standards – Prompt account statement / change of add / bank etc 18

What are the Types of Mutual Funds ? By structure Close-ended

Interval Funds

Open-ended

By Portfolio or Asset Class Equity

Debt

Money Market

Equity Funds Index Funds Sector Funds

Fixed Income Funds

Money Market Mutual Funds

Balanced Fund

Liquid Plan 19

Mutual Funds in the USA ◆

Over 8,000 mutual funds with total assets of over USD 8 trillion

◆

Every second household is a mutual fund investor

◆

Mutual funds have overtaken bank deposits

Total FuM break-up - US

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What is an SIP? • Investing a fixed sum, regularly in a mutual fund • Allows one to buy units in a particular scheme on a given date every month • Similar to regular savings schemes like a recurring deposit

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Benefits of Cost Averaging Avg. Cost vs Nav since inception~

90 Avg Cost

80

Nav(Rs.)

70 60 50 40 30 20 10 Nov-06

Apr-06

Aug-05

J an-05

J un-04

Nov-03

Mar-03

Aug-02

J an-02

May-01

Oct-00

Mar-00

Aug-99

Dec-98

May-98

Oct-97

Mar-97

J ul-96

Dec-95

May-95

Oct-94

0

Past performance may or may not be sustained in future ~Assume a hypothetical investment of Rs.1000 every month in PruICICI Power since inception

An SIP reduces the average cost of investment in fluctuating markets The above is for illustration purposes only

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Lump sum investment vs. SIP The direction of the markets is unpredictable. Rs.80000 invested in lumpsum at inception in Pru ICICI Tech vs. Rs.1000 invested every month (for 82 months) since inception

280000

247329

240000 200000 160000

107172

120000 80000 40000

Lumpsum Invstt

Nov-06

J ul-06

Mar-06

Nov-05

J ul-05

Mar-05

Nov-04

J ul-04

Mar-04

Nov-03

J ul-03

Mar-03

Nov-02

J ul-02

Mar-02

Nov-01

J ul-01

Mar-01

Nov-00

J ul-00

Mar-00

0

Performanc e of lump sum investment depends on the price at which they are bought

Sip Invstt

Past performance may or may not be sustained in future

An SIP reduces these risks by spreading the investments over a longer period of time, at various levels of the market The above is for illustration purposes only

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SIP vs Lump Sum Investment Returns on Lump Sum investment

Returns on SIP

24 Mutual Fund investments are subject to market risks Please read the offer documents carefully before investing. Past performance may or may not be sustained in future

ICICI Pru POWER Inception : 1994 Diversified Equity Scheme 10, 000 Invested @ inception : Today Rs 1,00,590

Rs 1000 invested as SIP since inception : 156 Installment : cost Value Rs 156000 Today’s Value : 10,97,401 = 37.41% retn XIRR 25

ICICI Pru Dynamic Plan Inception : Oct 2002 Diversified Equity Scheme Rs 10,000 Invested @ Inception : Today Rs 79,490 Rs 1000 invested as SIP since Inception : 59 Installments : Cost Value Rs 59,000 Today’s Value : Rs . 1,80,534 = 48.90% XIRR Retn

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ICICI Pru Emerging Star Fund Inception : Oct 2004 Diversified MID Cap fund

Rs 10,000 Invested @ Inception : Today Rs.34,530 Rs 1000 Invested as SIP since Incpetion 36 installments : cost Value Rs 36,000 Today’s Value : Rs 64,418 retn 44.11 % XIRR

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ICICI Pru Infrastructure Fund Inception : Aug 2005 Infrastructure Theme Fund Rs 10,000 invested @ inception : Today Rs 27,120 Rs 1000 invested as SIP since Inception : 25 installments : cost Value Rs, 25,000 Today’s Value : Rs 38,093 = 48.10% XIRR Retn

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Thank you Happy Investing

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