SYSTEMATIC INVESTMENT PLAN

Presented By :
Date :23.02.2009

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What is a Mutual Fund ?

 Diversified , professionally
managed portfolio of securities
 Your investments is pooled
2. With Fund
1. Investors pool
along with others investments Managers who
their money
 Benefits derived as those of an
institutional investor
 Risk diversification – investing
3. Invest in
4. Returns , passed
in a pool of funds comprising of
50-60 stocks from various
sectors
backsecurities which
 Tax benefits to investor generate
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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 ?
Say , an investor INR 10,000 in equities for 10 consecutive years at the peak of
the market every year.

Year Sensex Value

1996 4,069 This provides a

1997 4,548
compounded annualized
1998 4,281
return of 10.70%
1999 5,075
2000 5,933
2001 4,438
2002 3,713
2003 5,839
2004 6,603
2005 9,398 11

2006 13,399
Marketing Timing: Does it matter ?
 Say , an investor invests INR 10,000 in equities for 10 consecutive years at
the lowest levels of the market every year .

Year Sensex Value

1996 3,367
1997 3,361
1998 3,893 This provides a
1999 3,740 compounded annualized
2000 5,001
2001 3,604
return of 11.50%
2002 3,469
2003 3,049
2004 5,591
2005 6,493 12

2006 11,280 Investments into sensex at 2007-2008

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 ……

 Nil is a businessman. He is married to Mina 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. 17
Systematic Investment Plan

 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 )

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Systematic Investment Plan

 However, Nil 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 : 19
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 Consuming
2. Risky
3. 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 down
2. Overtime the market fluctuations are averaged
3. Most likely you will realize a saving on the cost per unit
4. 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
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every month for 6 months.

How to make Sip work for you ?

 Set your financial goals

 Identify the scheme
 Decide the SIP amount
 Look for a long term commitment
 Aim for the big picture
 Start investing.
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Thank You

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