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Prudent sip presentation

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importance of sip

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Prudent sip presentation

  1. 1. Smart Investor’s Preference (SIP)
  2. 2. 25 Years What is the Average Age when one starts Earning?
  3. 3. What is the Average Retirement Age? 60 Years
  4. 4. Rs.15,000/- p.m. What is an Average Income of an Middle-Class House-hold?
  5. 5. Rs.5,000/- p.m. How much can a person save on a regular basis?
  6. 6. If a person can save Rs.5,000/- per month What 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%
  7. 7. At Age 60 his wealth would have been Rs.27 Crores
  8. 8. 4.90 Crores* 27 Crores* 40 years25 years 60 years Ram Shyam Savings 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
  9. 9. • 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 6100 5900 6650 6070 5700 6000 5000 5800 5400 6100 4000 4500 5000 5500 6000 6500 7000 Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec Priceper10grams Highest price Lowest quantity Lowest price Highest quantity 20 grams 15 grams Invest Regularly
  10. 10. • 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 result Invested 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
  11. 11. • 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 regularly Shouldn’t we also invest regularly? Invest Regularly
  12. 12. 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.Lakhs Rs.21.7 lakhs 30 Rs.1000 invested every month for 30 years @10% Invest Regularly
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. The Million Dollar Question I am convinced that I should save and invest regularly, but the million dollar question is… Where should I invest?
  17. 17. Risk Return Spectrum Savings Bank/ FD Liquid Funds PPF, NSC, KVP, PO Deposits, RBI Bonds Debt Funds Gold Real Estate Equity Risk Returnpotential Low High LowHigh 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
  18. 18. 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 Equities Source : CLSA Cumulative annualised returns (1980 - 2004)
  19. 19. Do you agree? Which product among all above has the potential to create greatest wealth for you? Equities …
  20. 20. Risk?? Returns are unsure! Equity – owners’ risk Volatility of returns Market Risk Sentiments in ST, Herd Mentality
  21. 21. Investor’s Psyche - Wrong emotion dominates at wrong time Fear Hope The Cycle of Fear, Greed & Hope Greed
  22. 22. Simply put …
  23. 23. 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 Deposits Inflation Gold Equity market (represented by BSE Sensex) has outperformed all other investment avenues Selecting Right Asset Class
  24. 24. 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
  25. 25. Years YEAR END SENSEX level 1 year 3 years 5 years 7 years 10 years 15 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% 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 0/13Pr obabilit y of Loss
  26. 26. 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
  27. 27. What is SIP • Invest a fixed amount, at regular, predetermined intervals and use the market fluctuations to your benefit   Dates Monthly Investment NAV Units Alloated 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 45.45 6 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 10 1-Oct-05 1000 14 71.43 11 1-Nov-05 1000 10 100.00 12 1-Dec-05 1000 14 71.43 TOTAL 12000 1001.75 Average NAV 13.67 Average Cost per unit 11.98 11.981
  28. 28. A Snapshot of poor performingA 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
  29. 29. A Snapshot of betterA 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
  30. 30. Start an SIP today and Sit back and Relax

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