Smart Investor’s Preference

(SIP)
What is the Average Age
when one starts Earning?

25 Years
What is the Average Retirement Age?

60 Years
What is an Average Income of an
Middle-Class House-hold?

Rs.15,000/- p.m.
How much can a person
save on a regular basis?

Rs.5,000/- p.m.
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%
At Age 60 his wealth would have been

Rs.27 Crores
 Starting Early

Ram Shyam 27
Crores*
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

4.90
Give time to your investments                  
Give time to your investments                   Crores*
rather than timing
rather than timing

25 years 40 years 60 years

Assumptions: (a) Savings grows at 5% annually (b) Returns assumed at 20% CAGR
 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
• Take advantage of market volatility
– Buy more when the markets are down
Rs. 10,000 worth of Gold bought every month
7000 Highest price
6650
6500 Lowest quantity
Price per 10 grams

6070 6100 6100

6000 20 grams 5800
6000
5900

5400
5700 15 grams 5400
5600
5500
5000
5000
Lowest price
4500 Highest quantity
4000
J an Feb M ar Apr M ay J un J ul Aug Sep Oct Nov Dec
 Invest Regularly

• Myth: Timing is essential to generate high returns

• Reality : It is the time and not the timing that matters
Invested a fixed amount in BSE Sensex
The result
annually for 25 yrs
On the worst day to buy 15% p.a.
(highest sensex each yr)

On the best day to buy

(lowest sensex each yr) 17% p.a.

Is it worth the risk or the tension?

Who can time the market to perfection?
Not even the experts can !!
 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?
 Invest Regularly
• …….It all adds up!
25
Rs.21.7 lakhs
20 Rs.1000 invested
every month for 30
years @10%
Rs. Lakhs

15

10

0
1 5 9 13 17 21 25 29 30

No. years
A small amount invested regularly can grow to substantial lumpsum
 EARN MORE

• Earn more…it can make a big difference

One time investment of Rs.1 lakh invested for 30 yrs

@ 6% @ 10% @ 15%

5.7 lakhs 17.45 lakhs 66.2 lakhs

 EARN MORE
Power of Compounding - QUIZ
• Rs. 10,000 invested every month for a period of 30 years

At 8% - 1.5 crores Postal Recurring

At 15% - 7.0 crores ??????

??????
At 20% - 23 crores
 The Formula for Creating Wealth

Start Invest Earn More Create

Early Regularly Wealth

Make your money work hard for you

TheI amMillion Dollar Question
convinced that I should save and invest regularly,

but the million dollar question is…

Where should I invest?

 High Risk Return Spectrum

Equity
Real Estate

Gold
Return potential

Debt Funds
PPF, NSC, KVP, PO Deposits, RBI Bonds

Liquid Funds
Savings Bank/ FD
Low

Low Risk High

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
18.25%

10.64% 10.27%
7.47% 7.12%

Inflation Gold G Secs Bank FD Equities

Source : CLSA

Cumulative annualised returns (1980 - 2004)

 Which product among all above has the
potential to create greatest wealth for you?

Equities …

Do you agree?
 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

Greed

Fear Hope

The Cycle of Fear, Greed & Hope

Simply put …
 Selecting Right Asset Class

Equity market (represented by BSE Sensex) has

outperformed all other investment avenues

Sensex

Compan Bank
y Deposit
Deposits s

Inflation

Gold
 Past Performance (BSE Sensex)

Year Sensex Investment Rs.

1979 100 1,00,000

2006 13,000 1,30,00,000

In past 27 years BSE Sensex has given about 19.5% returns

This is in spite of …

• Two wars • At least 3 recessionary periods

• At least three major financial scandals • 10 different governments and
• Assassination of 2 prime ministers • An unfair share of natural disasters
 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,   Dates Monthly Investment NAV Units Alloated

predetermined intervals and use the 1 1-Jan-05 1000 10 100.00

market fluctuations to your benefit 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

11.981 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

A Snapshot of poor performing
schemes
A Snapshot of better
performing schemes
Start an SIP today and Sit back and Relax