Systematic Investment Plan (SIP)

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Systematic Investment Plan (SIP)

• The Smart Investors Preference

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Human Life Cycle
Phase I
Phase II
Phase III
Childs Marriage
Childs Education
Housing
Child birth
Marriage
38 yrs
10- 20 yrs
22 yrs
Earning Years
Post Retirement Years
Education
Age- 22 yrs
Age- 60 yrs
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Phase II The Most Challenging Phase

• Meet current recurring expenses
• Rent, Electricity, Telephone
• Childs education, Childs marriage
• Annual Holiday with family.
• Build capital assets
• House Car.
• Make provisions for
• Retirement Contingencies- Illness, Accidents,
  etc.

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It is Critical, Yet Most Dont Do It
I will start from next month
I dont have time
I dont have money to save
I dont have the requisite skills
The returns are hardly worth the effort
The paper work is just too tedious
The alternatives are not exciting enough
And the list goes on..!!!!
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Getting rich is simpler than you think !!
Rs.1000 invested every month for 30 years
Rs.70 lakhs
Rs.22 lakhs
Rs.10 lakhs
The Power of Compounding Even small amounts
invested regularly can grow substantially
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The Formula for Creating Wealth
Make your money work hard for you
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Start Early!

• You
• Age 25 years
• Start Today
• Invest 5 years
• Amount Rs 10,000 p.a.
• Redemption on retirement (age 60)

• Your Twin
• Age 25 years
• Start at age 40
• Invest 20 years
• Amount Rs 10,000 p.a.
• Redemption on retirement (age 60)

You start investing
Your twin starts investing
You stop investing
Note- Returns are assumed to be 10 p.a.
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Delays affect wealth creation
Rs. 1000 invested p.m. _at_ 10 p.a. till the age of
60 yrs
Just 5 years of delay reduces the wealth by half!
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Invest Regularly

• Builds wealth over the long term
• Just Rs. 1500 per month invested for 17 years
  _at_10 would grow to Rs. 8 lacscould be used for
  your daughters marriage
• Take advantage of market volatility
• Buy more when the markets are down

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Invest Regularly

• Myth Timing is essential to generate high
  returns
• Reality It is the time and not the timing that
  matters

Invested a fixed amount in BSE Sensex annually
for 25 yrs
The result
On the worst day to buy (highest sensex each yr)
15 p.a.
On the best day to buy (lowest sensex each yr)
17 p.a.
Is it worth the risk or the tension? Who can
time the market to perfection? Not even the
experts can !!
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Invest Regularly

• It is the small drops that make an ocean!!
• Relieves you of the last minute pressure
• Slow and steady wins the race
• E.g. Split your Sec 80C investments into smaller
  amounts and invest every month
• Reduces the risk of investing at the wrong time
• Difficult to predict the market and know when is
  the right time

We earn regularly We spend regularly Shouldnt
we also invest regularly?
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Create Wealth 22 gt 5

• All we need is. a blend of
• Paycheck
• Time
• Discipline
• We already have two of them- Paycheck and Time
• All we need is Discipline
• The Discipline of making small but regular
  investments

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Systematic Investing

• A method of investing regularly to benefit from
  the stock market volatility
• Regular- Similar to Recurring Deposit
• Convenient and Hassle-Free
• Automatic investments, one-time instruction,
  transactions on the net
• No entry load
• No entry charge for systematic investments
• Forced saving
• Similar to PF Small amount invested every month
  to become a huge sum after some years
• Light on the wallet

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The Million Dollar Question
I am convinced that I should save and invest
regularly, but the million dollar question
is Where should I invest?
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Risk Return Spectrum
High
Equity
Real Estate
Gold
Return potential
Debt Funds
PPF, NSC, KVP, PO Deposits, RBI Bonds
Liquid Funds
Savings Bank/ FD
Low
Low
High
Risk
NoteThe above chart is for illustrative purpose
only and is not marked to scale. The chart is
based on our perception of the risk and return
potential of various investment avenues
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Equities- The Most Attractive Asset Class
Equities have outperformed all other asset
classes in the long run - globally as well as in
India
Cumulative annualised returns (1980 - 2004)
Source CLSA
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Equities outperform in long term
In the 5-year period, equities have outperformed
all other traditional forms of investment in 12
out of 14 five-year periods (86) since 1980
Source RBI Report on Currency and Finance
(1997-98) BSE Sensitive Index of Equity Prices
BSE Cumulative annualised returns (1980 - 98)
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Benefits of long term investing
In the twelve 15-year periods between 31.3.79 and
31.3.05, the Sensex has not given negative return
even on a single period
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Benefits of long term investing
Rs. 1000 p.m. invested in BSE Sensex for 10 years
Rs. 2,41,162
As on June 30, 2005
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Outperformance
Value of SIP of Rs. 1000 p.m. in BSE Sensex and
BAF
SIP investments in Birla Mutual Fund have
consistently done better than the benchmark
As on July 14, 2005

• Notes
• SIP assumed to be on the first working day of
  each month
• Brokerages and dividends are assumed to be Nil
  for the purpose of the above calculations

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BMF vs Benchmark
Annualised Returns for SIP
As on July 14, 2005

• Notes
• SIP assumed to be on the first working day of
  each month
• Brokerages and dividends are assumed to be Nil
  for the purpose of the above calculations

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Mutual Funds The easy way to invest

• Professional Management
• Ensures that the best brains are managing your
  money
• Diversification
• Ensures risk reduction
• Liquidity
• Ensures that you get back your money, whenever
  you want
• Transparent
• Ensures you are apprised of the portfolio
  regularly
• Extremely well regulated
• Ensures that the fund follows laid down processes
  
• Tax efficient
• Tax free dividends, LTCG on equity completely tax
  free, Sec 80C

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Birla Sun Life

• Promoted by the Aditya Birla Group Sun Life
  Financial of Canada
• 10 years of performance track record
• Recipient of awards/ recognitions for its fund
  performance
• One of the largest private sector mutual funds
• AUM gt Rs. 11,000 crores
• One of the pioneers in the Indian MF industry
• Strong processes in-house research
• Offers the complete bouquet of investment schemes
• Across all risk profiles and all investment
  horizons

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Start an SIP todayand Sit back and Relax
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Asset Allocation

• The art of allocation of your investments across
  asset classes
• Allocate assets based on
• Goals Long term or short term
• Risk taking capacity Conservative or Aggressive
• Age Young or old
• Model Portfolios

Note- The above model portfolio is for
illustrative purpose only
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Short Term Needs

• Besides asset allocation,
• one also needs to keep side some money in liquid
  form- to meet the planned and unplanned
  requirements in the short term
• and still earn optimally on these short term
  funds set aside
• What is the option that comes to your mind?
• Savings Account ??
• Fixed Deposit ??

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Did You Know

• Returns
• Current Savings Bank interest rate is 3.5 p.a.
• Current FD returns for a 7-15 day FD is
  3.5-3.75 p.a.
• Savings bank interest- calculated on the min of
  the balances in the account between the 10th and
  31st
• Effective interest rate turns out to be MUCH
  lower !!
• Taxation
• Interest Income is taxable at the Maximum
  Marginal Tax Rate
• 30 ( surch. edu. cess) for assesses in the
  highest tax slab
• Sec 80L deduction no longer available
• ..\savingsbank_effectiverateofreturn.xls

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Birla Cash Plus- A superior alternative

• Generates market related return
• Currently in the range of 4-4.5 p.a.
• Investor earns each day till the investment
  remains in the Fund
• Returns accrue on the investment amt o/s at each
  day end
• As against a savings bank account
• Liquid
• No lock-in period- as against FD
• Ease in transacting
• Redemptions online/ on phone, Direct credit,
  Readicheque
• Taxation

select locations
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Readicheque

• Undated cheques of prespecified denominations
  issued in favour of investor against his
  investment
• At the time of investment itself
• Can be banked as and when the investor desires
• No intimation required to be given to BMF by the
  investor
• Relieves the investor of the hassles of
• Giving a redemption request
• Waiting for the cheque to reach him
• Reduces turnaround time
• Quickens the redemption cycle
• Returns intact
• Returns accrue till the day prior to the day on
  which the cheque hits BMFs bank account

available only in BCP subject to certain
conditions and in select locations
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Disclaimer

• The information contained in this document is
  not a complete presentation of every material
  fact regarding any industry/security or the fund
  and is neither an offer for units nor an
  invitation to invest. This communication is meant
  for use by the recipient and not for
  circulation/reproduction without prior approval.
  The views expressed are based on current market
  conditions and information available to and do
  not constitute investment advice.
• Risk Factors Mutual Fund investments are
  subject to market risks and the NAVs of the
  schemes may go up or down depending upon the
  factors and forces affecting the securities
  market. Past performance of the schemes managed
  by Birla Mutual Fund is not necessarily
  indicative of future performance of the schemes.
  Please refer to the offer document before
  investing.

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Thank You