Prudent sip presentation
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Smart Investor’s Preference(SIP)
25 Years
What is the Average Age when one starts Earning?
What is the Average Retirement Age?
60 Years
Rs.15,000/- p.m.
What is an Average Income of anMiddle-Class House-hold?
Rs.5,000/- p.m.
How much can a personsave on a regular basis?
If a person can save Rs.5,000/- per monthWhat will be his wealth when he retires?
Assuming: He increases his investments by 5% every year
Invests in an Asset class that gives returns of 20%
At Age 60 his wealth would have been
Rs.27 Crores
4.90 Crores*
27 Crores*
40 years25 years 60 years
Ram ShyamSavings Starting Age 25 40
Savings - Monthly SIP Rs.5,000/- Rs.15,000/-
Saving Years till age 60 35 years 20 years
Total Amount Saved (appx.) Rs.57 lacs Rs.62 lacs
Starting Early
Give time to your investments rather than timing
Assumptions: (a) Savings grows at 5% annually (b) Returns assumed at 20% CAGR
Give time to your investments rather than timing
• Builds wealth over the long term– Just Rs. 1500 per month invested for 17 years @10% would
grow to Rs. 8 lacs…could be used for your daughter’s marriage• Take advantage of market volatility
– Buy more when the markets are down
Rs. 10,000 worth of Gold bought every month
5600 5400
61005900
6650
6070
57006000
5000
58005400
6100
4000
4500
5000
5500
6000
6500
7000
J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec
Pric
e pe
r 10
gram
s
Highest priceLowest
quantity
Lowest priceHighest quantity
20 grams 15
grams
Invest Regularly
• Myth : Timing is essential to generate high returns• Reality : It is the time and not the timing that matters
Is it worth the risk or the tension? Who can time the market to perfection?
Not even the experts can !!
On the worst day to buy (highest sensex each yr)
The resultInvested a fixed amount in BSE Sensex annually for 25 yrs
On the best day to buy (lowest sensex each yr)
15% p.a.
17% p.a.
Invest Regularly
• It is the small drops that make an ocean!!• Relieves you of the last minute pressure• Slow and steady wins the race
– E.g. Split your Sec 80C investments into smaller amounts and invest every month
• Reduces the risk of investing at the wrong time– Difficult to predict the market and know when is the
right time
We earn regularly; We spend regularlyShouldn’t we also invest regularly?
Invest Regularly
A small amount invested regularly can grow to substantial lumpsum
• …….It all adds up!
0
5
10
15
20
25
1 5 9 13 17 21 25 29
No. years
Rs. L
akhs
Rs.21.7 lakhs
30
Rs.1000 invested every month for 30 years @10%
Invest Regularly
One time investment of Rs.1 lakh invested for 30 yrs
@ 6%
5.7 lakhs
@ 10% @ 15%
17.45 lakhs 66.2 lakhs
• Earn more…it can make a big difference
EARN MORE
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
7.0 crores
23 crores
Postal Recurring
??????
??????
EARN MORE
The Formula for Creating Wealth
Create Wealth
Start Early
Invest Regularly
Make your money work hard for you
0
1,000
2,000
3,000
4,000
5,000
6,000
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
Earn More
The Million Dollar QuestionI am convinced that I should save and invest regularly,
but the million dollar question is…
Where should I invest?
Risk Return Spectrum
Savings Bank/ FD
Liquid Funds
PPF, NSC, KVP, PO Deposits, RBI Bonds
Debt Funds
Gold
Real EstateEquity
Risk
Ret
urn
pote
ntia
l
Low HighLow
Hig
h
Note:The above chart is for illustrative purpose only and is not marked to scale. The chart is based on our perception of the risk and return potential of various investment avenues
Equities- The Most Attractive Asset Class
Equities have outperformed all other asset classes in the long run - globally as well as in India
7.47% 7.12%
10.64% 10.27%
18.25%
Inflation Gold G Secs Bank FD EquitiesSource : CLSA
Cumulative annualised returns (1980 - 2004)
Do you agree?
Which product among all above has the potential to create greatest wealth for you?
Equities …
Risk??
Returns are unsure!
Equity – owners’ risk
Volatility of returns
Market Risk
Sentiments in ST, Herd Mentality
Investor’s Psyche - Wrong emotion dominates at wrong time
Fear Hope
The Cycle of Fear, Greed & Hope
Greed
Simply put …
0
1,000
2,000
3,000
4,000
5,000
6,000
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
Sensex
Company Deposits
Bank Deposit
s
Inflation
Gold
Equity market (represented by BSE Sensex) has outperformed all other investment avenues
Selecting Right Asset Class
In past 27 years BSE Sensex has given about 19.5% returns
Past Performance (BSE Sensex)
Year Sensex Investment Rs.
1979 100 1,00,000
2006 13,000 1,30,00,000
This is in spite of …
• Two wars• At least three major financial scandals• Assassination of 2 prime ministers
• At least 3 recessionary periods• 10 different governments and• An unfair share of natural disasters
Years YEAR END SENSEX level 1 year 3 years 5 years 7 years 10 years 15 years0 31-Mar-79 100.001 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% 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 0/13Probability of Loss
Using the Wisdom
We can direct our savings in such a manner that we create wealth,
the way we wish
DISCIPLINED SAVINGS +
SUFFICIENT TIME+
RIGHT ASSET CLASS=
Smart Investor’s Preference
What is SIP• Invest a fixed amount, at regular,
predetermined intervals and use the market fluctuations to your benefit
Dates Monthly Investment NAV
Units Alloate
d
1 1-Jan-05 1000 10 100.00
2 1-Feb-05 1000 8 125.00
3 1-Mar-05 1000 6 166.67
4 1-Apr-05 1000 18 55.56
5 1-May-05 1000 22 45.456 1-Jun-05 1000 12 83.33
7 1-Jul-05 1000 19 52.63
8 1-Aug-05 1000 14 71.43
9 1-Sep-05 1000 17 58.82
101-Oct-05 1000 14 71.43
111-Nov-05 1000 10 100.00
121-Dec-05 1000 14 71.43
TOTAL 12000 1001.75
Average NAV 13.67
Average Cost per unit 11.98
11.981
A Snapshot of poor performing A Snapshot of poor performing schemesschemes
Pru Tech Fund 61,000 105,930 22.06%
Alliance New Millenium 61,000 106,347 22.22%
Pru Tech Fund 61,000 41,480 -7.34%
Alliance New Millenium 61,000 33,673 -11.08%
Amount Invested One Time Current Value Annualised
Returns
Scheme Name
Amount Invested through SIP(Rs. 1000 p.m.) from March
2000
Current Value As on
31-03-2005
SIP Returns
A Snapshot of better A Snapshot of better performing schemesperforming schemes
HDFC Equity 61,000 161,209 39.69%
Reliance Growth 61,000 226,349 54.64%
HDFC Equity 61,000 146,501 18.90%
Reliance Growth 61,000 167,023 22.02%
Scheme Name
Amount Invested through SIP(Rs. 1000 p.m.) from March
2000
Current Value As on
31-03-2005
SIP Returns
Amount Invested One Time Current Value Annualised
Returns
Start an SIP today and Sit back and Relax