investing and you
TRANSCRIPT
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Rs. 1 Crore today Inflation assumed @ 6% p.a
Inflation Robs you r Wealth
5583785
3118082
1741099
972223
0
1000000
2000000
3000000
4000000
5000000
6000000
10 years 20 years 30 years 40 years
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Inflation You r No. 1 Enemy
Instrument Return
(Pre-tax)
Return
(Post-tax)
Inflation Real
Return
Bank FD 9.0% 5.94% 6.0% -0.06%
PPF 8.0% 8.0% 6.0% 2.00%
Tax rate has been assumed as 33.99%
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Wealth Cr eation fo r mula
FV = P (1 + r) n
Save More
Earn More
Start Early
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H ow to ea r n mo r e?
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REALESTATE
GOLD
ULIPs
MUTUALFUNDS
SMALLSAV INGS
DIRECTEQU ITY
COMPANYDEPOS ITS
BANKDEPOS ITS`
INVESTMENTOPT IONS
Investment Options
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Risk & Retu r n Asso c iated with ea c h
investment optionInvestment Avenue
Return Risk
Direct Equity Market-Linked Very high
Bank Deposits Fixed Low
Small Savings Fixed Zero
ULIPs Market-linked Low to Very High
Mutual Funds Market-linked Low to Very HighGold Market-linked High
Property Market-linked High
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Equities A r e T he Best Long T er m Bet
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
M a r - 8 0
M a r - 8 1
M a r - 8 2
M a r - 8 3
M a r - 8 4
M a r - 8 5
M a r - 8 6
M a r - 8 7
M a r - 8 8
M a r - 8 9
M a r - 9 0
M a r - 9 1
M a r - 9 2
M a r - 9 3
M a r - 9 4
M a r - 9 5
M a r - 9 6
M a r - 9 7
M a r - 9 8
M a r - 9 9
M a r - 0 0
M a r - 0 1
V a l u e o
f i n i t i a l i n v e s
t m e n
t o
f R s . 1
0 0 0
BSE 30 returns 15.28%
Gold Price Change7.09%
One-year Bank Deposits9.12%
Wholesale Price Change7.84%
Source : RBI Report on Currency and Finance (2000-2001)BSE Sensitive Index of Equity Prices - BSE
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But Equities a r e r isky
0
5
0
5
20
25
30
35
40
Pe iod Pe iod 2 Pe iod 3 Pe iod 4 Pe iod 5 Pe iod 6
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A r e they?BSE SENS ITIV-Mon .27/04/79-30/11/06 I-1 TREND
79808182838485868788899091929394959697989900010203040506
Price
2000
4000
60008000
1000012000
5567.45
2773.73
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We all view r isks in ou r own way
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Long-te r m investing in Equity
Average Performance of Actively managed MFs inIndia since 1996
Period Chance of Gain Chance of Loss
1 year 67.0% 33.0%
3 years 84.7% 15.3%
5 years 100% 0%
So urce: Fidelity. 1/1/96 t o 1/1/06. R o lling averages are based on the c ombined average of 15 largest op en-ended diversi f ied equity f unds having a track rec ord of over 10 years. Past per formance may or may n ot be sustained in f uture.
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Risk P er sonality
Risk Capacity AgeFinancial Literacy
Accumulated Wealth Annual Savings
Risk Tolerance
Attitude towards investment decisions Ability to cope with losses
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Risk of being Safe
Ami tabh Invests hisentire savings of Rs100 in B a nk FD @10% p.a. for 25 years.25 years hence
Amitabh gets Rs1,083/-
Amitabh has to pay taxof Rs 328 and has Rs755 balance in hispocket.
S hahru kh Invests Rs25 in Eq u ity MutualFu n ds wh ic h ear n sh im 15% p.a. for 25years.Shahrukh gets Rs 823/-after 25 years.Shahrukh pays no taxand has Rs 823 in hispocket.
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Risk
The bigger risk is the risk of being too safe!!!There are no free lunches.
I havent as yet discovered a low-risk, high-return instrument which is what all of us want.The alternative then is to accept a degree of risk in your portfolio for the quest of higher return, over time.
Peter Lynch
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C ommon M odel po r tfolios
Conse rv tiv e
Equity Debt
Bala nced
Equity Debt
Aggress ive
Equity Debt
Very Aggress ive
Equity Debt
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Investment Options
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Equity M utual Funds
Could form the Core R ISK portfolio for anyinvestor Convenient to invest as Lumpsum or through a Systematic Investment Plan (S IP)Tax efficient - Dividends are tax-free andLong Term Capital Gains is tax-exempt
Highly Liquid Redemption in 3 businessdays.
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Retu r ns of Some Equity S c hemes with
per
for
manc
e tr
ac
k of > 10 year
sSchemeName
Launch Date Returns for last5 years
ReturnsinceLaunch
Value of Rs 1 lacinvested atLaunch
Birla AdvantageFund
Feb 1995 40.70% 23.26% 15.67 lacs
DSP MLEquity
Apr 1997 53.87% 27.49% 14.46 lacs
Franklin
India Prima
Nov 1993 47.54% 23.47% 21.26 lacs
HDFCEquity
Dec 1994 48.15% 23.58% 16.81 lacs
C alculati ons as on A pr 11, 2008 So urce: Valueresearch online.c om
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P or tfolio M anagement Se r vic es
For the aggressive investor who wants to takeexposure to direct stocksDifferent types of portfolios are available
Largecap/Midcap/SmallcapLiquidity variesTax Liability is with the investor and different from anEquity Mutual FundExamples
Franklin Templeton PROWESSHSBC Signature.
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Fixed M atu r ity P lans
For your fixed income portfolioSimilar to a fixed deposit as it has a fixedtenure and an indicative returnTax-efficient as it is treated as a capital assetExamples
LICMF FMP 14 Months - Open till 21Apr08Indicative Yield 9.50% Pre-tax and 8.32% Post-taxThis is equivalent to 12.46% Fixed Deposit.
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Str uc tu r ed Pr odu c ts
Capital Guaranteed Products Mathematicalmodels which build a component of equityand debt to provide safety of PrincipalInvestedExamples
FT Fixed Tenure Fund with 70% debt and 30%
equity. Debt ensures capital safety on maturityHSBC Capital Guard a PMS. Capital Guaranteeby HSBC Plc.
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Real Estate Pr odu c ts
They invest in Real Estate projects andprovide you with an opportunity to participatein developers returns.Closed ended with very low LiquidityReturns are not tax-freeExample HDFC Real Estate PMS.
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A r t Funds
Have been offered in the pastNow not available as SEB I has to formulateguidelinesMay be available through offshore routeExamples
Osians Art Fund - Contemporary IYatra Art FundCrayon Capital Art Fund.
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Role of Up M ar ket
Identification of the right investment optionand the right mix for youMaintaining & tracking of your portfolio andproviding you with regular updates on thesameUpdates on new investment options available
depending on their suitability A relationship for a lifetime and not for a jobtenure.
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In C on c lusion
You need to invest As inflation puts a leak to your savings andtraditional investment options are no longer attractive enough
As you should create an alternate source of income beyond your business
Asset Allocation is the keyThere are a variety of investment instrumentsto meet diverse investment objectives
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T hank you
Rajiv Satija
92166 0116199100 72548 (99100-RAJ IV)