SYSTEMATIC INVESTMENT PLAN

Presented By : Frontline Securities Limited Date :23.02.2009

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What is a Mutual Fund ?

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 ?

Childrens 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 %

Time Value of Money

A fixed monthly expense of INR 30,000 p.m. today over time

Time value of money

While the value of your savings erodes over time , thanks to inflation

The expense savings mismatch

LETS PLAN TO GET RICH TOGETHER

INVESTORS NEED TO SAVE REGULARLY INTO ASSETS THAT CAN BEAT INFLATION TO MEET THEIR FINANCIAL GOALS.

Performance of various asset classes

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.
Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Sensex Value 4,069 4,548 4,281 5,075 5,933 4,438 3,713 5,839 6,603 9,398 13,399

This provides a compounded annualized return of 10.70%

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2006

Marketing Timing: Does it matter ?

Say , an investor invests INR 10,000 in equities for 10 consecutive years at the lowest levels of the market every year .

Year 1996

Sensex Value 3,367

1997
1998 1999

3,361
3,893 3,740

2000
2001 2002

5,001
3,604 3,469

This provides a compounded annualized return of 11.50%

2003
2004 2005

3,049
5,591 6,493

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2006

11,280

Investments into sensex at 2007-2008 levels.

Market Timing doesnt matter

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Invest for long term

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MORAL

Market timing doesnt 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

Lets 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 childrens education/marriage and buy a bigger house. In order to hedge against uncertainties of business , he has been regularly investing in fixed income instruments.

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Systematic Investment Plan

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 Portfolio diversification Superior returns ( refer slide on cumulative annualized returns for different asset classes for details )

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Systematic Investment Plan

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 :

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Systematic Investment, An example

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?

1.

2.
3.

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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 ?

1.

2.
3. 4.

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

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Three common reasons for not investing

I dont have enough money to invest I am too busy making money to worry about managing it I dont 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

Invest regularly and periodically instead of Lumpsum / 1 time investment. 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.

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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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