Behind Every Successful Investor

June 11, 2011

The Flow

Need for Financial Planning Savings- A Tradition Different Asset Classes Mutual Fund Is MF a Good Option? NFO or Existing Scheme? SIP Investments What you should look for? Indian Economy- A Prospect

June 11, 2011

Need for Financial Planning

To beat Inflation Value of Money To fund future needs To meet contingencies Standard of living after retirement

June 11, 2011

To beat Inflation

Commodity Colgate toothpaste (100gm tube) Hamam Soap Petrol (per litre) LPG cylinder

Price in 1987 Price in 1997 8.05 3.05 7.99 56.15

Inflation 8.91% 9.92% 12.30% 9.40%

18.90 7.85 25.48 137.85

June 11, 2011

To beat Inflation

Commodity Colgate toothpaste (100gm tube) Hamam Soap Petrol (per litre) LPG cylinder

Price in 2007 Price in 2017 44.50 19.50 52.50 297.50 104.51 55.36 167.48 730.57

June 11, 2011

Value of Money
Inflation actually leaves you with nothing in hand
47826 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 1 Y e a r 5 Y e a rs 0 Y e a 1 5 Y e a 2 0 Y e a 2 5 Y e a rs 1 rs rs rs 10000 13675 18701 25574 34973 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 1 Y e a r5 Y e a rs0 Y e a1rs Y e a2rs Y e a2rs Y e a r s 1 5 0 5 7161 5128 3672 2630 1883 10000

Inflation at 6.46%
June 11, 2011

To Meet contingencies
Repair & Maintenance Impulsive Buying

Hospital Expenses Professional Eventualities

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To fund future needs

June 11, 2011

Living Standard
Imagine a life without car

My House

Regular Health Check-ups

Routine House Hold Expenses

June 11, 2011

SAVING An Indian Religion

India 24.3%

France 11.1%

Germany 10.7% Japan 6.3%

nos r a p m C A i o

UK 5.5% USA 1.4%

gn va S d ohes uo H i l

Indians Are amongst the highest savers in the world!

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SAVINGS How Are They Invested?

Equity Claims on Government LIC/PPF/ NSC Deposits It was invested in the Following manner

Total annual household savings in 2006 was $149 bn

2 16 23 39 9 12 48

Currency Gold

Real Estate

Source: CMIE, Nov04

June 11, 2011

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And The Returns

Returns % 17.9 20 15 6.46 10 5 0 10.4 7.2 11.3

Inflation

Gold

Bank FD

G Sec

Equity

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How Good Your Investments Are??

Consider the 9.5% taxable Fixed Deposit with Bank

Inflation Your Real ENEMY!

Interest rate = 9.5% Less: tax @30%** i.e. 2.85%

Less: inflation @ 6.46%*

Post-tax & inflation Interest = 0.19%!

YOU ARE JUST MAINTAINING YOUR CAPITAL!

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Equity Market

Sophisticated Market Free Pricing and Integration with World Markets Selection of Stock Time , Knowledge and Luck Substantial Capital for Diversification

What do we do???
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The BEST way to take an Advantage of Equity without taking the risk is

Mutual Fund

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What is MF?

Investor

Fund Manager

Returns

Securities
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INVESTOR Sponsor

Trustees

Mutual Fund

Asset Management Company

Custodian

Registrar

SEBI

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Types of Mutual Funds-By Objective

Low Risk/ Return Potential

Money Market/Liquid Objective: Preservation of capital; some current income Gilt Objective: Better protection of capital; no credit risk Income & MIP Objective: Current income; some capital appreciation Balance Objective: moderate capital appreciation and preservation of capital Equity Funds Objective: Capital appreciation
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High Risk/ Return Potential

June 11, 2011

Types of Mutual Funds- Investment

Open ended funds
Initial issue for a limited period Continuous sale and repurchase Size of the fund changes as investors enter and exit NAV-based pricing

Closed ended funds

Sale of units by fund only during IPO Listing on exchange and liquidity for investors Size of fund is kept constant Price in the market is usually at a discount

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Advantages of Mutual Fund

Diversification Professional management Reduction in risk Reduction in transaction cost Liquidity Convenience and flexibility Can hedge the risk via derivatives

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Mutual Funds
A Vehicle for Wealth Creation
A mutual fund is a collective investment that allows many investors, with a common objective, to pool individual investments and give to a professional manager who in turn would invest these monies in line with the common objective. Professional Management

Diversification

Convenience

Liquidity

Tax Benefits

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Systematic Investment Plan

June 11, 2011

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Systematic Investment Plan

A Systematic Investment Plan is an investment strategy used in mutual fund investing that allows investments of

Fixed amounts

at regular intervals

In one scheme

An example:

Investing Rs 1,000 each month in a mutual fund The investment is done at the applicable NAV of the mutual fund on the date of investment

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Advantages of SIP
Rupee Cost Averaging Advantage Small Amounts of Investment Disciplined Investing

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Rupee Cost Averaging

Bull Markets or Bear Markets - an SIP is your best friend
When the NAV falls due to a fall in the market - you will accumulate more units at lower prices And, when the NAV rises you will buy lesser units at higher prices
June 11, 2011 25

Rupee Cost Averaging

Month J anuary February March April May J une Total Amount Invested (Rs.) 1,000 1,000 1,000 1,000 1,000 1,000 6,000 Average Cost Per Unit 13.83 Unit Price (Rs.) 11 13 13 14 15 17 No. of Units Purchased 90.91 76.92 76.92 71.43 66.67 58.82 441.67

Average Cost Per Unit under SIP: 13.58

Note: The example given here is for illustrative purpose only. Not intended to represent any specific Mutual Fund Scheme.

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Rupee Cost Averaging

Month J anuary February March April May J une Total Amount Invested (Rs.) 1,000 1,000 1,000 1,000 1,000 1,000 6,000 Average Cost Per Unit 15.67 Unit Price (Rs.) 18 16 15 17 15 13 No. of Units Purchased 55.56 62.50 66.67 58.82 66.67 76.92 387.14

Average Cost Per Unit under SIP: 15.50

Note: The example given here is for illustrative purpose only. Not intended to represent any specific Mutual Fund Scheme.

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Other Advantages of an SIP

Small Amounts of Investment - even sums as small as Rs.100 to1,000/- can be invested at regular intervals
Disciplined Saving - inculcates discipline in your investment - investments can happen automatically from your bank account

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Benefits of Investing Early

97.80

T he Powe r of C ompounding

49.54

24.88

12.28

5.83

2.54

35

30

25

20

15

10

Rs 1000 every month assuming the return at merely 13.50%

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0.86

How Your Money Would Have Grown???

Period Investment
25 Years 20 Years 15 Years 10Years 5 Years 300,000 240,000 180,000 120,000 60,000

Sensex
3,902,159 1,525,423 532,467 311,032 141,790

Gold
515,986 415,269 322,968 222,893 99,080

FD
1,159,971 667,431 357,569 174,495 69,393

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Long Way to Go.

12 M o n th s M o n th s M o n th s 36 60 120 M o n th s
N o. of C omple te d SIP s S IPs with + iv e R e turns S IPs with -iv e R e turns % of + iv e R e turn SIPs % of -iv e R e turn S IPs Av e rage R e turn (% P A) 315 211 104 67 33 11 291 234 57 80 20 12 267 227 40 85 15 13 207 186 21 90 10 18

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Existing Scheme or NFO???

What should you do?

Existing

NFO

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Kya Low NAV Achha Hai?

S. 1 2 3

N A V a s N A V a s A b s o l u Aen n u a l i z e d on on t N o . S ch e m e st st R 1 M a y , 0 6 M a y , 0R6 e t u r n s e t u r n s 1 S B I C o n t r a FRu sn 3 6 . 1 7 s 3 5 . 6 9- 1 . 3 3 % - 1 . 6 0 % d R K o t a k C o n t r aR F u n d2 8 s 1 4 . 0 0- 8 . 4 0 % - 1 0 . 1 6 % s15. R U T I C o n t r a FRu s 1 0 . 4 9 s 8 . 9 5 - 1 4 . 6 8 % 1 7 . 7 4 % nd R 33

June 11, 2011

Kya Low NAV Achha Hai?

S. 1 2 3

N A V a s N n V a s o n s o lu A e n u a liz e oA Ab tn N o. S che m e st st R 1 M a y , 0 6 M a y , 0R e t u r n s e t u r n s 1 6 F id e lity E q u ity F uRnsd1 8 .7 4R s 2 0 .2 1 7 .8 7 % 9 .5 1 % S u n d a r a m G r o w R s F 6 .7d7R s 6 2 .8 5 - 5 .8 7 % - 7 .0 9 % th 6 u n F r a n k lin In d ia B luResc 1h2ip1 .0R8 s 1 2 2 .3 5 .0 5 % 1 .2 7 % 1
34

June 11, 2011

What you should look at?

Risk Portfolio Management Track Record Fund House Investment Process Fund Size

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Is Mutual Fund a Good Option???

Lets Find Out

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Time Tested Strategy For Building Wealth

Start Early Invest Regularly Invest Systematically Invest in Equity

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Key to Success
Invest only after ensuring adequate liquidity have a minimum of 3-6 months of monthly expenses in liquid debt products Diversity Average out timing is difficult Be realistic in expectations of return (sustaining high returns is difficult probably impossible!) Invest for the long-term Patience is the key
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What they say...

Time is Important then timing the market -Mark Twain October is the worst month for investment, the other risky months are January, February, March, April, May, June, July, August, September, November, December -Warren Buffet

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India- Driving Factors

Domestic Consumption Industrial Growth Demographics Emerging Sectors

15 Years of Reforms Expected GDP Growth Increasing Govt Spending Forex Reserves

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Perceived Risks to the India Story

Can force the RBI to raise interest rates to slow down the economy Can increase cost of inputs and make Indian products less competitive Can reduce the growth momentum in the economy

High interest rates could put pressure on corporate profitability It can also hamper the access to funds to fast growing Indian corporates It can slow down consumer demand

Rising Interest Rates

June 11, 2011

Rising Inflation

6 41

Future Will Be For...

Who Invest Regularly Who Invest For Long Term Who is a Disciplined Investor Who Has Patience

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Than ks
Anand Rathi Securities June 11, 2011 43