basic sip asst allocat producttraining
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Franklin Templeton Worldwide
More than 50 years of experience in
global investing
Third largest independent fund
management group in the US.
First and only mutual fund company
added to the S&P 500
Over US$ 267 billion assets under
management; over 10 million
investor accounts world-wide
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FRANKLIN TEMPLETON INVESTMENTS
As on 30 May, 03
India
One of the largest Mutual Funds with over
Rs.10,720 crores@in assets.
Close to 1 million shareholder accounts
Healthy asset mix and great choice in equity and fixed- income
investment management style
Sizeable footprint in the country presence in 33 cities
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BEST PERFORMING OPEN END FUNDS IN 5 OUT OF 5 CATEGORIES
Equity - Franklin India Prima Fund, Franklin India Prima Plus
BalancedFranklin India Balanced Fund
Income - Templeton India Income Builder Account
Gilt - Templeton India Government Securities Fund
Liquid - Templeton India Treasury Management Account
For the quarter Oct-Dec 2002. Past performance is not indicative of future results. Ranking Source:CRIS-RISC (a wholly owned subsidiary of CRISIL); Methodology of ranking: CRISIL ~ CPR-1 indicates very
good performance in the category (Top 10% of the universe). The number of schemes considered for the
analysis are: Diversified Equity 35; Income / General debt 22; Gilt - 12; Liquid 19; Balanced 20.
The criteria used for computing the CRISIL CPR are Superior Return Scorecard based on NAVs,
Concentration, Liquidity and Asset Size of the scheme. Sales load has not been taken into consideration.
CRISIL BEST FUNDS AWARDS Dec-2002
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Source:
Star Ratings : Value Research fund rankings are based on 18 month weekly risk adjusted performance. Forequity funds , a minimum performance history of 3 years is required and for debt funds a minimum history of 18 months
is required.
FRANKLIN TEMPLETON FUNDS
RANKINGS & RATINGS
Value Research Fund Ratings
Month ended December,02
BLUECHIP,PRIMA, PRIMA PLUS ,TMA
TIGF,Taxshield (Open), IBA
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BENEFITS OF A MUTUAL FUND
Professional
Management
Service
Diversification
Affordability
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INVESTMENT PYRAMID
Capital Preservation
Income
Capital GrowthRisk: Medium to High
Risk: Medium to Low
Risk: Low to Medium
Period: 3 to 5 years
Period: 1 to 3 years
Period: Less than 1 years
Growth
Funds
Stocks
Income/Bond Funds
Company Fixed Deposits
Bonds
Debentures
Cash / Money Market Funds
Short-term deposits /Government Paper
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Risk
Liquid Funds
Debt Funds
THE RISK RETURN TRADE-OFF
Growth Funds
Balanced Funds
Sectoral Funds
Gilt Funds, Bond Funds, Hi Yield Funds
Ratio of Debt : Equity
Aggressive, Value, Growth
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SOMETHING ABOUT INCOME FUNDS?
MONITORS Credit Ratings continuously for you while investing inFIXED INCOME instruments only
Enables you to SPREAD your investment over a number of FIXEDINCOME instruments
NO LOCK-IN period, redemption requests are processed within twoworking days
AFFORDABLE to invest - Minimum investment of Rs. 10000/-
CONVENIENT - No TDS, No renewals, No worry of losing certificates
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Context of Investing
PROFESSION INVESTMENTS
INCOME
CURRENT
EXPENDITURE
SAVINGS
FUTUREEXPENDITURE
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Process of Financial Planning
Set a goal
Prepare an investment plan
Implement the financial plan
Evaluate on a regular basis
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Household Expenses
Householdxpenditures
are on the riseNew Products
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Household ExpensesIn the good old days many of these products were LUXURIES
but today most are NECESSITIES
Items 1987 1997
Cable T. V. No Yes
Colour T. V. No Yes
Telephone No Yes
Washing Machine No Yes
Microwave No Yes
Two-wheeler/Car No Yes
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Cost of Living
Items 1987
( Rs )
1997
( Rs. )
Colgate toothpaste( 100 gm tube )
8.05 18.90( 8.91 % )
Hamam Soap 3.05 7.85( 9.92 % )
Masala Dosa 3.50 14.00( 14.87 % )
Petrol( per litre )
7.99 25.48( 12.30 % )
L P G Cylinder 56.15 137.85( 9.40 % )
Zodiac mens shirt 225.00 510.00( 8.53 % )
Source : Readers Digest
Nov 1997
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Cost of Living
Items 1997
( Rs )
2017
( Rs. )
Colgate toothpaste( 100 gm tube )
18.90 104.00
Hamam Soap 7.85 52.00
MasalaDosa 14.00 224.00
Petrol( per litre )
25.48 259.12
L P G Cylinder 137.85 830.85
Zodiac mens shirt 510.00 2620.27
Assuming inflation to grow at the same rate during 1987-97
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INFLATION ROBS YOUR PURCHASING POWER(Assuming inflation @ 8% p.a.)
21,50046,600
100,600
217,200
10 years 20 years 30 years 40 years
Rs. 10,000 today
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17.1
30.8
56.3
103.9
9% 12% 15% 18%
REGULAR SAVINGSTHE SIMPLEST WAY TO COMBAT INCREASING HOUSEHOLD
EXPENDITURE
Rs. 1000 saved every month for 30 years can grow to
a sizeable amount of wealth
depending on the return generated on these savings
% Per annum
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Equities are the best long term bet!Cumulative Annualised Returns
(1980-98)
Source : RBI Report on Currency and Finance (1997-98)
BSE Sensitive Index of Equity Prices - BSE
9.19%7.62%
9.74%
14.47%
20.16%
Inflation Gold Bank FD Co. FD Equities
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consider this ..
Sensex was at 3292.85 on December 1, 1993the inception
date of Bluechip fund
Sensex was at 3337.31 on June 9, 2003
This means, if someone invested Rs. 100000 in Sensex, thevalue of his investments is Rs. 97,891
However, if the investor invested Rs. 100000 in Bluechip fundon inception ..
The value of holdings is Rs. 506137
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Yes, they go up and down in short-term
However, with time risk comes down
1 3 5 7 9
Years
Risko
f
capitalero
sion
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If that is what equities can deliver .
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What Should the Investor do
If equities consistently give better returns over the long-
term, and Im a long-term investor with no immediate cashflow needs, should I not invest all my money in equities?
Definitely NO
Should do an Asset Allocation
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What is Asset Allocation?
Its about diversifying ones portfolio among asset classes such as
bonds, stocks, real estate, or cash.
Its referred to in terms of the target percentages for each asset
class. For example, a portfolio could have a mix of 60 percentstocks, 30 percent bonds and 10 percent cash.
Its the financial representation of an investors personality: the
ideal asset allocation is one that best balances an investors
profile and objectives
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NEED BASED INVESTMENT STRATEGY
Age Group
(Years)
Growth
(Equity)
Income
(Bonds)
Liquidity
(Banks)
25- 40 75% 15% 10%
41- 50 50% 35% 15%
51- 60 25% 55% 20%
Above 60 15% 60% 25%
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Periodic Review
Making Asset Allocation Work
Review of objective - EXAMPLEYears to goal Equity Allocation %
TODAY 10 70%
After 5 yrs 5 60%
After 7 yrs 3 40%
After 9 yrs 1 10%
A periodic review of objectives can ensure an investor is not leftat the mercy of the equity markets when he needs his money
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Periodic Rebalancing
EXAMPLE Growth Funds Income Funds
Frozen Allocation 40% 60%
45% 55%
Switch from Growth Funds to Income Fundsto rebalance
40% 60%
REBALANCING HELPS INVESTORS ENTER
EQUITIES AT LOWS AND EXIT AT HIGHSWITHOUT HAVING TO TIME THE MARKET
Making Asset Allocation Work
Bull Market skew
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Summing Up
Asset Allocation helps:
1. Control Portfolio Risk
2. Increase the predictability of portfolio returns
3. Steer the portfolio towards ones financial goals
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Eighth wonder of the world:
S I P
It can create wealth forevery person in the world
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FV = PV(1 + r)n
FV = Future Value
PV = Present Value
r = Rate of Return/ Coupon Rate
n = No. of compounding periods
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FV = PV(1 + r)n
Applications aside, what do you think this equation reallysignifies?
The essence of how to create wealth!
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Wealth creation is nothing but enhancement of future value
FV = PV (1 + r)n
Enhancing Future Value
The more yousave, makes a
difference
The sooneryou start,makes a
difference
PV nr
The moreyou earn,
makes adifference
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HYPOTHETICAL EXAMPLE OF AN SIP
Rs. 1000 invested every month
Average Price per unit: Rs. 10.00 Average Cost per unit : Rs. 9.83
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
1stMonth 2ndMonth
3rdMonth
NAV = 12.00Units = 83.3
NV = 10.0Units = 100
NAV = 8.0
Units = 125
NAV = 10.0
Units = 100
4thMonth
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Making Volatility Work for you
Rupee Cost Averaging
Month Amount Invested(Rs.)
Purchase Price(Rs.)
No. of UnitsPurchased
1 1000 12 83.333
2 1000 15 66.667
3 1000 9 111.111
4 1000 12 83.333
TOTAL 4000 48 344.444
Average Sales Price of Units : Rs. 12 ( i.e. Rs. 48/4 months)Average Purchase Cost of Units : Rs 11.61 ( i.e. Rs. 4000/344.444units)
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Themore you save,makesadifference
Growth rate of 7% p.a.
Amount saved per month
5,000 1,500,000 4,073,986
3,000 900,000 2,444,391
1,500 450,000 1,222,1961,000 300,000 814,797
Total Amount
Saved
Value after
25 years
The Power of Compounding
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Themoreyouearn,makesadifference
Rs. 1000 invested p.m.
Growth Rate
8% 184,166 957,367
10% 206,552 1,337,890
15% 278,657 3,284,07420% 382,364 8,626,708
Value after 10
years
Value after
25 years
The Power of Compounding
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The Simple Solution
An SIP with Franklin Templeton Funds
1. Convenient
2. Affordable
3. Widest choice of top performing funds
4. No Entry Load for Equity Funds
START EARLY; SAVE REGULARLY
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350,000
10,133,456
330,000
7,643,653
300,000
4,999,569
Saves from 25 to
60
Saves from 27 to
60
Saves from 30 to
60
Savings
Returns
Assuming an annual savings of Rs. 10,000 in an instrument
providing return of 15 % p.a.
START EARLY; SAVE REGULARLY
Every Year Counts
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Let us look at some investment options fromFranklin Templeton funds
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DIVERSIFIED DEBT FUNDS
Templeton India Income Fund
Templeton India Income Builder Account
Templeton Monthly Income Plan (Debt)
SUITABILITY
Good standalone combination of risk diversification, liquidity & returns
Great complement to equity in portfolio asset allocation
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DEBT FUNDS WITH MARGINAL EQUITY
Templeton Monthly Income Plan
Equity
FT Monthly Income Plan
SUITABILITY
A slice of equity to beat inflation.
The complete solution for investors with low risk appetite
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LIQUID & MONEY MARKET FUNDS
FIXED INCOME FUNDS
Templeton India Liquid Fund
Templeton Treasury Management Account
Templeton Government Securities fund (Treasury Plan)
FT India Gilt Fund ( Liquid Plan)
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Diversified Equity Schemes
Franklin India Bluechip Fund - Large Caps
Franklin India Prima Plus80% Large Caps , 20% Medium Caps
Franklin India Prima FundMedium & Small Caps Stock
Templeton India Growth FundValue InvestingLarge Caps
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WHY INVEST IN EQUITY TODAY
Equity Market at the bottom (Minimum downside but offers
good upside potential in the long term)
Attractive valuations
Improved economic and earnings growth ( Low PE Ratio,Improved Earning Ratios indicates sound fundamentals)
Positive Current Account Surplus ( One of the prime reason forHigh Liquidity in the market )
Ample Forex Reserves should mitigate the impact of highinflation
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Invest in FRANKLIN INDIA BLUECHIP FUND
A Very disciplined & focused investment approach
Only Private Sector Equity Fund to have Consistent performanceover Nine Long Years
Invests only in Large Caps Stocks
Annualised Return of 19.75% (as on 31.03.03)since Inception
Annualised Return of 18.97% ( as on 31.03.03)in case of MonthlySystematic Investment Plans
(Past performance may or may not be sustained)
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EquityFund
LatestNAV
90 Days 180Days
OneYear
TwoYear
ThreeYear
FiveYear
Bluechip 25.50 8.10% 17.03% 20.17% 6.96% 5.62% 21.85%
TIGF 14.34 8.88% 15.18% 14.35% 7.15% 5.31% 8.36%
PrimaPlus
25.77 9.29% 15.25% 15.20% 9.71% 6.26% 21.38%
PrimaFund
36.88 25.40% 33.14% 37.15% 34.06% 21.52% 25.45%
DebtFund
LatestNAV
90 Days 180Days
OneYear
TwoYear
ThreeYear
FiveYear
IncomeBuilder
22.1239 3.17% 5.88% 16.50% 15.69% 14.73% 14.02%
TIIF 22.4630 2.90% 5.36% 14.72% 14.21% 13.63% 13.70%
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Thank You
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