Presentation on theme: "How can we create wealth? Start Saving Early The longer you save, the more you make Save in the Right Asset Class This will dictate how much wealth you."— Presentation transcript:
How can we create wealth? Start Saving Early The longer you save, the more you make Save in the Right Asset Class This will dictate how much wealth you create … Save Regularly Even a small amount saved regularly, is good
1.33 Crores* 5.71 Crores* 40 years 25 years60 years RamShyam Investment Starting Age2540 Investment - Monthly SIPRs.5,000/-Rs.10,000/- Saving Years till age 6035 years20 years Total Investment MadeRs.21 lacsRs.24 lacs Starting Early Give time to your investments rather than timing * Constant Savings Note: The above figures are for illustrative purpose only. There is no guarantee that the projection given would materialize.
Equity market (represented by BSE Sensex) has outperformed all other investment avenues Selecting Right Asset Class
Twin Benefits of Investing Regularly Disciplined Investing through Systematic Investment Plans (SIPs) is the ideal way to reduce risk Rupee Cost Averaging Average Purchase cost will be less Automatic Timing At higher prices - less units At lower prices – more units Rising Market Falling Market MarketUnits PurchasedMarket Units Purchased Save Regularly
Investing in the BSE Sensex – 25 years Market timing does not matter over the long term Data source: ICRA MFIE Give Time rather than Timing the Equity market 16.02%02% Fixed investment on 1 st day of every month 16.90% 15.07% Fixed investment at highest sensex value every year Fixed investment at lowest sensex value every year
Managing Investor’s Psyche Wrong emotion dominates at wrong time Fear Greed Hope Cycle of Fear, Greed & Hope
SIP : Your companion for all times SchemeReturns Value on 31 Jan 09 Returns above Sensex Reliance Growth Fund - Gr28.58 9,322,9426,589,197 Reliance Vision Fund - Gr25.03 7,336,444,602,899 SBI Magnum Multiplier Plus 9317.04 4,290,5461,556,801 HDFC Capital Builder-Div17.24 4,121,7031,387,958 HDFC Equity Fund-Div24.85 7,250,2524,516,507 HDFC Top 200-Div21.48 5,779,0283,045,283 Franklin India Bluechip Fund Gr23.55 6,641,8133,908,068 Franklin India Prima Fund Gr21.18 5,663,7862,930,041 Franklin India Prima Plus Gr23.89 6,795,5254,061,780 Birla Sunlife Capital Taxrelief 9621.73 5,876,3113,142,566 SBI Magnum Tax Gain Fund22.10 6,021,6383,287,893 BSE 30(Sensex) 10.212,733,7450 NSE 50 10.202,732,963-782 Returns of SIP of Rs.10000 started from Feb 97 (Investment Amount is Rs. 14.40 lacs) These SIPs have gone through : Technology Bust, 9/11 attacks, Stagnant markets (2000-2003) and current 60% fall in the market Returns as on 31.10.08
SIP – The best way for investment Case Study Market hit a high of 5450 in Mar 2000 Market crashed to lows of 2600 It took almost 4.5 years for the market to scale back the level of 5400 in Sep 2004. Let’s see how did the SIP investors fare in that scenario
Investor 1 – Panic Investors These investors had started their SIP of Rs. 2000 in Mar 2000 peak. With the decline in the market they panicked & stopped their SIP in a span of 13 months Scheme NameInvestment Value in Mar 01 Returns Reliance Growth26,00018,846-46.1% HDFC Equity Fund26,00020,870-33.9% ICICI Technology Fund26,00014,944-67.3% Birla New Millennium26,00014,596-69.0% These investors actually made a loss on their SIPs by stopping it in the downturn… SIP Start DateMar-00 SIP End DateMar-01 No. of installments13
Investor 2 – Smart Investors These investors had started their SIP of Rs. 2000 in Mar 2000 peak. They continued their SIP and kept on investing in the SIPs. Scheme NameInvestment Value in Sep 04 Returns Reliance Growth1,10,000 3,25,736 50.5% HDFC Equity Fund1,10,000 2,53,337 38.1% ICICI Technology Fund1,10,000 1,74,300 20.5% Birla New Millennium1,10,000 1,64,224 17.8% SIP Start DateMar-00 No. of installments55 These investors have made phenomenal returns even though market has delivered no return (From 5400 level in Mar 00 to 5400 level in Sep 04
Investor 3 – New Investor These investors started their SIP of Rs. 2000 in Mar 2001, 1 year after the fall in the market Scheme NameInvestment Value in Sep 04 Returns Reliance Growth86,0002,48,52866.8% HDFC Equity Fund86,0001,90,34148.3% ICICI Technology Fund86,0001,50,84433.2% Birla New Millennium86,0001,43,95430.3% Investors who have started SIP in lean period have made fantastic returns SIP Start DateMar-01 No. of installments43
Sr NoDateHDFC Tax saver (in Rs.) Sensex% Change Hdfc% Change SensexParticular 131-Mar-9610000.003366.00 25-Dec-967630.002812.00-23.70%-16.14%Initial Fall 322-Feb-0071918.225883.00842.57%109.21%Tech Rally 421-Feb-0142061.732600.00-41.51%-55.80%Twin Tower Attack 514-Jan-04128092.516194.00204.53%138.23%Recovery 617-May-04107723.954505.00-15.90%-27.27%Govt Change 714-Dec-04174912.856325.0062.37%40.40%Recovery 810-May-06436782.8312612.00149.71%99.40%India Re Rating 914-Jun-06293623.038929.00-32.78%-29.20%Heavy FII Selling 1007-Jan-08617573.5320812.00110.33%133.08%All Time High 1131-Jan-09276947.929424.00-55.16%-54.57%US Sub Prime Total Absolute Returns CAGR(Annual Returns) 3529.72% 29% 235.14% 8.30% Inception of Current Don’t be afraid of Falls – Stay Long Term, Wealth would be created Investments of Rs.10000/- becomes Rs.276947/- even after several falls in the NAV during the period of 13 Years. And finally, with the current correction, it’s NAV has fallen by 50% 3 times over the period of past 14 years. Even after the current fall, the fund is still delivering a CAGR of 29% widely beating the index which has given 8.3% returns. The Absolute returns from the fund even after the current fall are staggering 3529.72%. Equity investments through Mutual Funds deliver 15-20% of returns over Long term. Bull and bear market cycles are nature of Equity markets and are going to contine in future also.