investing and you

8/8/2019 Investing and You

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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)

investing and you

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