Transcript Document

SYSTEMATIC INVESTMENT PLAN
Presented By :
Frontline Securities Limited
Date :23.02.2009
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What is a Mutual Fund ?
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Diversified , professionally
managed portfolio of securities
Your investments is pooled
along with others investments
Benefits derived as those of an
institutional investor
Risk diversification – investing
in a pool of funds comprising of
50-60 stocks from various
sectors
Tax benefits
1. Investors pool
their money
2. With Fund
Managers who
3. Invest in
4. Returns , passed
securities which
back
generate
to investor
Why Invest ?
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Children’s education / marriage
Medical Emergency
Retirement
Aspirational goals – House , Foreign Holiday
Other Obligations
TIME VALUE OF MONEY
Patience and discipline are required not to make the
wrong move at the wrong time – the results can be
dramatic – it is far more common to do the wrong thing
than to not do the right thing.
Considering inflation @ 5 %
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Time Value of Money
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A fixed monthly expense of INR 30,000 p.m.
today over time ……
Time value of money
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While the value of your savings erodes over
time , thanks to inflation
The expense – savings mismatch
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LET’S PLAN TO GET RICH
TOGETHER
INVESTORS NEED TO SAVE REGULARLY
INTO ASSETS THAT CAN BEAT
INFLATION TO MEET THEIR FINANCIAL
GOALS.
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Performance of various asset
classes
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Cumulative annualized returns of different
asset classes .
Equity – C
MARKET TIMING –
DOES IT MATTER ?
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Marketing Timing: Does it matter ?
Say , an investor INR 10,000 in equities for 10 consecutive years at the peak of
the market every year.
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Year
Sensex Value
1996
4,069
1997
4,548
1998
4,281
1999
5,075
2000
5,933
2001
4,438
2002
3,713
2003
5,839
2004
6,603
2005
9,398
2006
13,399
This provides a
compounded annualized
return of 10.70%
Marketing Timing: Does it matter ?
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Say , an investor invests INR 10,000 in equities for 10 consecutive years at
the lowest levels of the market every year .
Year
Sensex Value
1996
3,367
1997
3,361
1998
3,893
1999
3,740
2000
5,001
2001
3,604
2002
3,469
2003
3,049
2004
5,591
2005
6,493
2006
11,280
This provides a
compounded annualized
return of 11.50%
Investments into sensex at 2007-2008 levels.
Market Timing doesn’t matter
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Invest for long term
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MORAL
Market timing doesn’t help !!!
…………….. It is the time in
the markets that matters
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Case Study – Systematic Investing
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Little Drops of Water Make the Mighty Ocean
Systematic Investment Plan
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Let’s take an example ……
Anil is a businessman. He is married to Tina who is a
housewife. He has a son and daughter , both are in
school.
Over next couple of years, he desires to follow a
savings plan to build wealth for his children’s
education/marriage and buy a bigger house.
In order to hedge against uncertainties of business ,
he has been regularly investing in fixed income
instruments.
Systematic Investment Plan
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The lower interest rates over the years have been worrying him.
He decides to take the help of Sreeni , financial advisor.
After carefully evaluating his financial goals and time required
to achieve his financial goals , he advises him to invest in
equity mutual funds for following reasons
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Portfolio diversification
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Superior returns ( refer slide on cumulative annualized returns
for different asset classes for details )
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Systematic Investment Plan
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However, Anil is not comfortable investing into equity
mutual funds as they are volatile and therefore risky
and avoidable.
Sreeni advises Mahesh to register for Systematic
Investment Plan (SIP) and make use of volatility in
the market rather than get worried and avoid
investing in equity mutual funds.
Anil is not clear as to how SIP will work to his
advantage and requests for more details
Sreeni explains as follows :
Systematic Investment, An
example
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Rahul & Viru are two friends. Rahul decides to invest using SIP
whereas Viru decides to make lump sum investment.
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Systematic investing , An example
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Systematic Investing, An example
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Why Systematic Investing?
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The Goal of most investors is to buy when the
prices are low, and sell when the prices are
high.
Sounds simple, but trying to time the market
like this is :
Time Consuming
Risky
And almost Impossible
A more successful strategy is to adopt
Rupee Cost Averaging.
What is Rupee Cost Averaging ?
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2.
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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 less when the market is up. You buy more
when the market is down
Overtime the market fluctuations are averaged
Most likely you will realize a saving on the cost per unit
This may lead to HIGHER RETURNS
Three common reasons for not
investing
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I don’t have enough money to invest
I am too busy making money to worry about managing
it
I don’t have the time or expertise to follow the market
movements and make investments at the right time.
SYSTEMATIC INVESTMENT PLAN
is the only answer to all reasons.
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Investment made easy – SIP
SIP is an investment program that
allows you to contribute a fixed amount
(as low as Rs.1000 )in mutual funds at
regular intervals.
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Systematic Investment Plan
The Smart Law of Averages
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Invest regularly and periodically instead of Lumpsum / 1
time investment.
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For example , if you have Rs. 60000 to invest – you can
either do a one time investment or alternatively you can
spread the investment amount over a period of time say
Rs. 5000 every month for 12 months or Rs.10,000 every
month for 6 months.
How to make Sip work for you ?
Set your financial goals
 Identify the scheme
 Decide the SIP amount
 Look for a long term commitment
 Aim for the big picture
 Start investing.
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Thank You
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