Why You Need To Get SIP Today
- 1. Systematic Investment Plan (SIP) The Smart Investors’ Preference
- 2. Human Life Cycle EducationEducation Earning YearsEarning Years Phase IPhase I Phase IIPhase II Phase IIIPhase III Age- 22 yrsAge- 22 yrs Age- 60 yrsAge- 60 yrs MarriageMarriage Child birthChild birth Child’s EducationChild’s Education Child’s MarriageChild’s Marriage HousingHousing 22 yrs22 yrs 38 yrs38 yrs 10- 20 yrs10- 20 yrs Post Retirement YearsPost Retirement Years
- 3. Phase II: The Most Challenging Phase Meet current recurring expenses – Rent, Electricity, Telephone – Child’s education, Child’s marriage – Annual Holiday with family…. Build capital assets – House; Car…. Make provisions for – Retirement ; Contingencies- Illness, Accidents, etc. Do you save and invest so that your dreams turn into reality
- 4. It is Critical, Yet Most Don’t Do It I will start from next month I don’t have the requisite skills The paper work is just too tedious And the list goes on…………..!!!! I don’t have time I don’t have money to save The returns are hardly worth the effort The alternatives are not exciting enough
- 5. Getting rich is simpler than you think !! Rs.1000 invested every month for 30 years 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 No. of years Valueofinvestment(Rs.) 6% p.a. 10% p.a. 15% p.a. Rs.70 lakhs Rs.22 lakhs Rs.10 lakhs The Power of Compounding Even small amounts invested regularly can grow substantially
- 6. The Formula for Creating Wealth Create WealthStart Early Invest Regularly Make your money work hard for you
- 7. Start Early! You • Age : 25 years • Start : Today • Invest : 5 years • Amount : Rs 10,000 p.a. • Redemption on retirement (age 60) Your Twin • Age : 25 years • Start : at age 40 • Invest : 20 years • Amount : Rs 10,000 p.a. • Redemption on retirement (age 60) Note- Returns are assumed to be 10% p.a. 1.74 4.52 11.72 0.1 1.75 6.3 0.67 0.1 00 25 30 40 50 60 Age (in yrs) ValueofInvestments (Rs.inLacs) You Your Twin You start investing Your twin starts investing You stop investing
- 8. Delays affect wealth creation Rs. 1000 invested p.m. @ 10% p.a. till the age of 60 yrs The Power of Starting Early 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 25 30 35 40 45 50 If you start investing when you are (years) WealthonRetirement Gains from Investment Investment Just 5 years of delay reduces the wealth by half!
- 9. Invest Regularly 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 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 Rs. 10,000 worth of Gold bought every month
- 10. 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.
- 11. 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 regularly Shouldn’t we also invest regularly?
- 12. Create Wealth 2+2 > 5 All we need is…. a blend of – Paycheck – Time – Discipline We already have two of them- Paycheck and Time All we need is Discipline – The Discipline of making small… but regular investments
- 13. Systematic Investing A method of investing regularly to benefit from the stock market volatility Regular- Similar to Recurring Deposit Convenient and Hassle-Free – Automatic investments, one-time instruction, transactions on the net Forced saving – Similar to PF : Small amount invested every month to become a huge sum after some years Light on the wallet
- 14. The Million Dollar Question I am convinced that I should save and invest regularly, but the million dollar question is… Where should I invest?
- 15. 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
- 16. 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 Cumulative annualised returns (1980 - 2004)
- 17. Equities outperform in long term In the 5-year period, equities have outperformed all other traditional forms of investment in 12 out of 14 five-year periods (86%) since 1980 44% 56% 37% 63% 14% 86% 0% 20% 40% 60% 80% 100% 1 year 3 years 5 years Equities outperformed Other Investments outperformed Source : RBI Report on Currency and Finance (1997-98) BSE Sensitive Index of Equity Prices – BSE Cumulative annualised returns (1980 - 98)
- 18. Benefits of long term investing In the twelve 15-year periods between 31.3.79 and 31.3.05, the Sensex has not given negative return even on a single period Investment Horizon Number of periods Positive Returns Negative or Zero Returns % age times Positive returns Maximum Return Minimum Return 15 years 12 12 0 100% 27% 13% 10 years 17 16 1 94% 35% -2% 5 years 22 19 3 86% 53% -5% 3 years 24 19 5 79% 82% -15% 1 year 26 16 10 62% 267% -47%
- 19. Benefits of long term investing SIP( monthly) - 10 years 0 50000 100000 150000 200000 250000 300000 1 13 25 37 49 61 73 85 97 109 121 Rs. 1000 p.m. invested in BSE Sensex for 10 years As on June 30, 2005 Rs. 2,41,162
- 20. Mutual Funds: The easy way to invest Professional Management – Ensures that the best brains are managing your money Diversification – Ensures risk reduction Liquidity – Ensures that you get back your money, whenever you want Transparent – Ensures you are apprised of the portfolio regularly Extremely well regulated – Ensures that the fund follows laid down processes Tax efficient – Tax free dividends, LTCG on equity completely tax free, Sec 80C
- 21. Mutual Funds Period Return P.A.From To Reliance Growth Fund 1st Jan , 2001 1st April, 2005 67.90 % F I Prima Fund 29 , Sept 94 29 , July 2005 29.37 % HDFC Equity Fund 1st Jan , 2001 1st April, 2005 47.98 % HSBC Equity Fund 1st Jan , 2003 1st April, 2005 66.42 % DSPML Opps Fund 1st Jan , 2001 1st April, 2005 48.96 % Birla Advantage fund 1st Jan , 2001 1st April, 2005 37.64 % Note :- Please Read offer document before investing. Past performance may or may not sustain in the future Systematic Investment Plan –Past performance
- 22. Investment Avenues Sr. No. Avenues Expected Returns (%) P.A. Remarks 1. Bank Fixed Deposits 5.5 % Approximately 1. Pre Tax 2. Liquidity 2. Corporate Deposits 7.00 % approximately 1. Pre Tax 2. Liquidity 3. Credit risk 3. Direct Equity Shares 15% to 20 % approximately 1. Best but only Long term 2. Lot of Maintenance is needed 4. Equity Mutual Funds 10 % to 15 % approximately 1. All the benefits of equity investing 2. Systematic Plan 3. Liquidity 4. Tax benefits
- 23. Start an SIP today and Sit back and Relax
- 24. Did You Know Returns – Current Savings Bank interest rate is 3.5% p.a. – Current FD returns for a 7-15 day FD is 3.5%-3.75% p.a. Savings bank interest- calculated on the min of the balances in the account between the 10th and 31st – Effective interest rate turns out to be MUCH lower !! Taxation – Interest Income is taxable at the Maximum Marginal Tax Rate • 30% (+ surch. & edu. cess) for assesses in the highest tax slab – Sec 80L deduction no longer available