series 3 a 36 months closed ended hybrid scheme. what do i do with my savings at these market...
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Series 3A 36 months closed ended hybrid scheme
What do I do with my savings at these market levels?
How do I meet my key financial goals from here?
Housing
Retirement
Children's’ education & marriage
Healthcare
Will the equity market volatility hurt me in the future?
WHAT ARE INVESTORS ASKING US TODAY?
WHY ARE INVESTOR’S WORRIED?
High Inflation
The different clouds of doubt
Market Volatility
Financial Goals
of life
How should I
invest?
EQUITY MARKET VOLATILITY
Markets in the short term are extremely volatile
BSE value source: www.bseindia.com
MARKET VOLATILITY OVER THE LONGER TERM
Markets in the long term are less volatile
“ Its not about Timing the market, its about Time in the Market.”
BSE value source: www.bseindia.com
MARKET VOLATILITY OVER THE LONGER TERM
Source: Credit Suisse research
EXAMPLE OF LONG TERM INVESTMENTS BENEFITS
The downside risk is higher in the short term
An analysis of 1,3,5 and 10yrs daily rolling returns for the period Jan 2000 till 31th Aug 2011
A study of 1,3,5 and 10yr returns on daily rolling basis for BSE Sensex. Returns more than 1 yr taken as CAGR return. Daily closing values were considered as investment and selling price assumption. BSE value source: www.bseindia.com
PROOF OF LONG TERM INVESTING BENEFITS
Analysis of daily returns on 1, 3 , 5 and 10 yrs basis since Jan 2000 till 31th Aug 2011 threw below given results:
Time Periods 1yr 3yr 5yr 10yr
Average returns 19.55% 19.33% 22.84% 15.89%
No of times negative returns 820 291 0 0
Total no. of Observations 2663 2164 1657 418
Probability of loss 30.8% 13.4% 0.0% 0.0%
Maximum return 114.69% 60.81% 47.26% 19.74%
Minimum Return -57.65% -18.12% 2.13% 10.47%
Standard Deviation 34% 18% 11% 2%
A study of 1,3,5 and 10yr returns on daily rolling basis for BSE Sensex. Returns more than 1 yr taken as CAGR return. Daily closing values were considered as investment and selling price.
BSE Sensex value source : www.bseindia.com
LUMPSUM V/S SIP
A comparison of lumpsum investment of Rs.36,000 in BSE on 01st Jan 2008 and 36 monthly SIP of Rs.1000 for Jan 2008 till Dec 2010
BSE value source: www.bseindia.com
LUMPSUM V/S SIP
Lumpsum Investment:
Requires timing the market
Risks of losing a big portion of investments
No benefits of cost averaging
Not favourable in volatile markets
Higher volatility of investment value
SIP Investment:
Benefits from both upside and downside in markets. Hence, no need of market timing
Investment grow over a period of time and hence, low risk of big losses in short time frame
Benefits of cost averaging
Favourable in volatile markets
Lower volatility of investment value due to regular investments and averaging of prices
‘Systematic investing’ is a process of investing regularly at fixed intervals. This interval could be monthly or quarterly
USE SYSTEMATIC INVESTING TO OVERCOME VOLATILITY
THE BENEFITS OF SIP
DISCIPLINED INVESTING
In an SIP, you invest in a disciplined manner irrespective of market conditions.
This means diversifying investments over various time periods
This means you don’t bother about market highs and lows
SIP helps minimise risk associated with volatile markets.
AVOID THE TEMPTATION OF TIMING YOUR INVESTMENTS "MARKET TIMING" IS BEST LEFT TO PROFESSIONALS
POWER OF COMPOUNDING
The earlier you start investing, the better it is for
creating long term wealth.
The longer you invest the more your money will
have the opportunity to grow.
THE AGE FROM WHEN YOU START MAKES A DIFFERENCE
START EARLY
Rs.1000/- invested p.m @ Rs 8% p.a till age 60 Total Amount
SavedValue at the age
of 60Starting Age
25 420,000 2,309,175
30 360,000 1,500,295
35 300,000 957,367
40 240,000 592,947
RUPEE COST AVERAGING
By investing a fixed sum at fixed intervals we can:
Buy fewer shares when the price is higher
More shares when the price is lower
It brings down the average cost per unit.
This is called Rupee Cost Averaging.
SIP takes care that your average price works out to be lower than the price
you would have paid at the market peak. However in a one way
movement, the SIP strategy may not benefit investors
WHY SIP IN CLOSED WAY?
IMPACT OF DISCONTINUING SIP IN BEAR MARKET
Total SIP done: Rs.24,000
Investment value Rs.17,331
An SIP started on 01st Jan 2007 in BSE SENSEX and if discontinued after the month of December 2008 would have resulted in the investment value of Rs.17,331/- as on 01st Jan 2009 on a investment of Rs.24,000/- yielding a negative CAGR of -15.02%
BSE value source: www.bseindia.com
IMPACT OF CONTINUING SIP IN BEAR MARKET
If the same SIP in BSE SENSEX would have been continued for 3yrs till Dec. 2009 the value of investments as on 04th Jan 2010 would have been Rs.46,724/- on the investment of total Rs.36,000/- resulting in a CAGR return of 9.08%.
BSE value source: www.bseindia.com
WHY SIP IN CLOSED WAY?
THE IMPACT OF TAX BENEFITS ON INVESTMENTS
A comparison of a normal STP from a Crisil Liquid Fund Index to BSE Sensex vis-à-vis an SIP Strategy fund shows the impact of taxation on a Systematic Transfer investment strategy .
An analysis of returns for the period 01st Jan 2007 till 04th Jan 2010 shows that investment in an closed ended SIP strategy fund yielded a CAGR return of 12.29% vis-à-vis an normal STP ‘s CAGR return of 11.29% .
Methodology: Assumed Rs.36,000 invested in Crisil Liquid Fund Index and 36 equal installments being transferred to BSE Sensex with short term capital gains tax on first eleven installments from liquid fund index and last eleven installments of BSE Sensex due to their redemption before completion of one year under normal STP strategy. Assuming redemption after 3yrs on 4 th Jan 2010. Tax rate @30.9% on short term gains on Liquid Fund index and 10.3% tax on gains thereafter. STCG @ 15.45% on last 11 installments in BSE SensexPlease consult your Tax advisor for more information Price Source: www.bseindia.com, www.amfiindia.com
Tax Benefits
Normal SIP : Each instalment must be held for a period of more than 12months in order
to get the benefit of long term capital gains tax.
STP :
Each transfer from debt to equity where the units are held for 12 months or less will be taxed
@ 30.9% .
Where units are held for more than 12 months, long term capital gains tax @ 10.3% (without
indexation) will be applicable
If redeemed after 3yrs the last 11 installments in equity is subject to short term capital gains tax
@15.45%
SIP – 3 : On maturity, the long term capital gain that may arise, will be tax free in the
hands of the investors due to it becoming equity oriented fund in last year. Further
scheme is also exempt from paying income tax on its income. However redemption on
maturity will be subject to securities transaction tax.Disclosure: The information set out above is included for general information purposes only and does not constitute legal or
tax advice. Investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme or investment products.
WHY SIP IN CLOSED WAY?
INTRODUCING
Series 3A 36 months closed ended hybrid scheme
WHAT IS TATA SIP?
Tata SIP Fund is a 36 months close-ended hybrid scheme
The fund portfolio will convert from a debt oriented to an
equity oriented portfolio over this period
It is based on the well-known and widely understood
Systematic Investment Plan concept
Greatly enhances the convenience of investing systematically
WHAT IS THE DIFFERENCE BETWEEN TATA SIP AND A REGULAR SIP?
Regular SIPs offer investors the facility of auto-debit of funds or post-dated cheques at time of investment.
Tata SIP Fund invites lump sum subscription amounts during the NFO which will initially be invested in debt and money market instruments. These funds will then be systematically transferred to equities over a period of 36 months.
HOW THE FUND WILL WORK?
The scheme will invest initially in debt and money market instruments.
In a systematic manner, funds will be allocated to equities over a close ended
period (like 36 months SIP in equities)
The process of systematic investing will help the scheme to reduce the risk of
volatility of equity market.
Investor has the option of redeeming his money or switching to Tata Pure
Equity Fund
HOW THE FUND WILL WORK?
Month end from date of allotment
Debt & money market (%)
Equity / Equity related instruments (%)
1st Month 97.25 2.75
2nd Month 94.50 5.50
3rd Month 91.75 8.25
4th Month 89.00 11.00
5th Month 86.25 13.75
6th Month 83.50 16.50
7th Month 80.75 19.25
8th Month 78.00 22.00
9th Month 75.25 24.75
10th Month 72.50 27.50
11th Month 69.75 30.25
12th Month 67.00 33.00
YEAR 1
HOW THE FUND WILL WORK?
Month end from date of allotment
Debt & money market (%)
Equity / Equity related instruments (%)
13th Month 64.25 35.75
14th Month 61.50 38.50
15th Month 58.75 41.25
16th Month 56.00 44.00
17th Month 53.25 46.75
18th Month 50.50 49.50
19th Month 47.75 52.25
20th Month 45.00 55.00
21st month 42.25 57.75
22nd Month 39.50 60.50
23rd Month 36.75 63.25
24th Month 34.00 66.00
YEAR 2
Month end from date of allotment
Debt & money market (%)
Equity / Equity related instruments (%)
25th Month 31.25 68.75
26th Month 28.50 71.50
27th Month 25.75 74.25
28th Month 23.00 77.00
29th Month 20.25 79.75
30th Month 17.50 82.50
31st Month 14.75 85.25
32nd Month 12.00 88.00
33rd Month 9.25 90.75
34th month 6.50 93.50
35th month 3.75 96.25
36th month 1.00 99.00
YEAR 3
HOW THE FUND WILL WORK?
TATA SIP BENEFITS - INVESTOR
One time investing
Hassle free SIP administration
Forced discipline irrespective of markets being good or bad
Smart Tax efficient investment tool due to long term capital gains
Lower expense ratio for debt component may boost returns
Appropriate to current stock market situation
Debt component may benefit from current peaking interest rate scenario
The investor also has the option of switching to Tata Pure Equity Fund at the end of 36 months
INVESTOR
TATA SIP BENEFITS – FUND MANAGER
Disciplined investment:
Not exposing entire investment amount to the risk of
volatility
Achieve better results by investing smaller amounts
regularly
Avoids Prediction of Uncertain Price Movement
By investing small amount regularly into equities, the
fund manager will avoid investing larger sums when
the markets are at a high and smaller sums when the
markets are at a low.
Relatively stable corpus
Since the fund is closed ended, the fund manager will
invest keeping in mind certain time horizons.
FUND MANAGER
TATA ASSET MANAGEMENT - 17 YEAR TRACK RECORD
The overall philosophy of fund management is to look for growth at reasonable valuations.
A disciplined approach to research with a bottom-up bias and active fund management has been at the core of our approach.
A strong risk-management framework.
Time tested – We have stuck to this approach for seventeen years
The ideal solution for our typical investors
India’s tomorrow is bright
But markets are in volatile phase
We have experienced sharp volatility at higher levels
Don’t worry. Ride the waves of prosperity of Indian Economy systematically through SIP
Kar lo TATA SIP Fund ka meter on, chahe market up ho ya down.*
The scheme aims to minimise risk associated with a volatile market by investing systematically into equities over the close ended period
Risk Factors
Nature and Investment objective: Tata Pure Equity Fund: An open ended equity scheme. To provide income distribution and / or medium to long term capital gains while at all times emphasising the importance of capital appreciation. Tata SIP Fund Scheme Series 3: A 36 months close ended hybrid scheme. At the end of 36 months, investors in the fund have the option of switching to Tata Pure Equity Fund. The Primary Investment Objective of the Scheme is to achieve a long term growth. The scheme seeks to achieve investment objective by investing systematically in the Equity /Equity related instruments. However there can be no assurance that the investment objective of the scheme will be realized, as actual market movements may be at variance with anticipated trends. The Mutual Fund/AMC and it empanelled brokers has not given and shall not give any indicative portfolio and indicative yield in any communication, in any manner whatsoever. Investors are advised not to rely on any communication regarding indicative yield/portfolio with regard to the scheme. Sale at Rs. 10/- per unit for cash at face value during the New Fund Offer. Minimum Investment Amount: Rs. 5000 and in multiples of Re. 1 thereafter. Two Options for Investment: Dividend Option and Growth Option. Investment Pattern: Year 1 - Equity/Equity related instruments: 0-35%, Debt and Money Market Instruments: 65% - 100%, Year 2 - Equity /Equity related instruments: 30-70% Debt and money market instruments: 30- 70%, Year 3 - Equity/Equity related instruments: 65% - 100%, Debt and money market instruments: 0% - 35%. Applicable Load Structure: Entry Load: NA, Exit Load: Nil. Transparency of operation / NAV Disclosure: Determination of Net Asset Value (NAV) on all business days. Liquidity: Being a close-ended Scheme, the fund does not intend to buy the units back till the maturity of the schemes. However, in order to provide the liquidity to the investors, the schemes are proposed to be listed on the BSE. (In principle approval from BSE has been obtained vide letter dated March 24, 2011). Listing: The units of the scheme will be listed on BSE. BSE Disclaimer: It is to be distinctly understood that the permission given by the Bombay Stock Exchange Ltd. should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by BSE nor does it certify the correctness or completeness of any of the contents of the Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of Disclaimer Clause of BSE. Statutory Details: Constitution: Tata Mutual Fund has been set up as a trust under the Indian Trust Act, 1882. Sponsors & Settlors: Tata Sons Ltd., Tata Investment Corporation Ltd. Investment Manager: Tata Asset Management Ltd. Trustee: Tata Trustee Co. Ltd. Risk Factors: Mutual Fund and securities are investments subject to market risks and there can be no assurance and no guarantee that the scheme will achieve its objectives. As with any investment in stocks, shares and securities the NAV of the units under the scheme can go up or down, depending upon the factors and forces affecting the capital market. Past performance of the previous Schemes, the Sponsors or its Group affiliates is not indicative of and does not guarantee the future performance of the Scheme. Tata Pure Equity Fund & Tata SIP Fund Scheme Series 3 are only the names of the schemes and does not in any manner indicate either the quality of the scheme, its future prospects or the returns. The sponsors are not responsible or liable for any loss resulting from the operations of the scheme beyond the initial contribution of Rs.1 lac made by them towards setting up the Mutual Fund. Investment by Mutual Fund schemes in fixed income securities is subject to interest rate risk, credit risk and liquidity risk. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio. Risks in using derivatives include the risk of default of counter party, mis-pricing and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Scheme specific risk factors have been mentioned in the Scheme Information document. The scheme is not offering any assured/guaranteed returns to investors. Please consult your tax advisor regarding applicability of prevailing tax laws. For scheme specific risk factors and other details please read the Scheme Information document (SID), Key Information Memorandum (KIM) & Statement of Additional Information (SAI) of the scheme carefully before investing. For Scheme Information Document (SID) & Application forms, please contact your nearest Collection Center / AMC Office.