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SYSTEMATIC INVESTMENT PLAN

Presented By :Frontline Securities Limited

Date :23.02.2009

Disclaimer : This document has been prepared by FRONTILNE SECURITIES LIMITED for the use of

recipient only and not for circulation. The information and opinions contained in the document have been compiled from sources believed to be reliable. Frontline does not warrant its accuracy, completeness and correctness. This document is not , and should not be construed as , an offer to sell or solicitation to buy any securities. This document may not be reproduced, distributed or published, in whole or a part ,by any recipient hereof for any purpose without prior permission from us .

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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

2. With Fund Managers who

3. Invest in securities which

generate

4. Returns , passed back

to investor

1. Investors pool their money

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Why Invest ?

Children’s education / marriage Medical Emergency Retirement Aspirational goals – House , Foreign Holiday Other Obligations

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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 %

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Time Value of Money

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

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Time value of money

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

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The expense – savings mismatch

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LET’S PLAN TO GET RICH TOGETHER

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

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Performance of various asset classes

Cumulative annualized returns of different asset classes .

Equity – C

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MARKET TIMING – DOES IT MATTER ?

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Marketing Timing: Does it matter ?

This provides a compounded annualized return of 10.70%

Year Sensex Value

1996 4,069

1997 4,548

1998 4,281

1999 5,075

2000 5,933

2001 4,438

2002 3,713

2003 5,839

2004 6,603

2005 9,398

2006 13,399

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

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Marketing Timing: Does it matter ?

Year Sensex Value1996 3,367

1997 3,361

1998 3,893

1999 3,740

2000 5,001

2001 3,604

2002 3,469

2003 3,049

2004 5,591

2005 6,493

2006 11,280

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

This provides a compounded annualized return of 11.50%

Investments into sensex at 2007-2008 levels.

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Market Timing doesn’t matter

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Invest for long term

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MORAL

Market timing doesn’t help !!!…………….. It is the time in

the markets that matters

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Case Study – Systematic Investing

Little Drops of Water Make the Mighty Ocean

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Systematic Investment Plan

Let’s 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 children’s 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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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 )

Systematic Investment Plan

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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 :

Systematic Investment Plan

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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?

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 :

1. Time Consuming2. Risky3. And almost Impossible A more successful strategy is to adopt Rupee Cost Averaging.

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What is Rupee Cost Averaging ?

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 :1. You buy less when the market is up. You buy more

when the market is down2. Overtime the market fluctuations are averaged3. Most likely you will realize a saving on the cost per unit4. This may lead to HIGHER RETURNS

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Three common reasons for not investing

I don’t have enough money to invest I am too busy making money to worry about managing

it I don’t 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 schemeDecide the SIP amountLook for a long term commitmentAim for the big pictureStart investing.

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Thank You