SYSTEMATIC INVESTMENT PLAN

Presented By :
Frontline Securities Limited
Date :23.02.2009

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recipient only and not for circulation. The information and opinions contained in the document
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 What is a Mutual Fund ?

Diversified , professionally
managed portfolio of securities
Your investments is pooled 1. Investors pool 2. With Fund
along with others investments their money Managers who
Benefits derived as those of an
institutional investor
Risk diversification investing
in a pool of funds comprising of
50-60 stocks from various 4. Returns , passed 3. Invest in
sectors back securities which
Tax benefits to investor generate

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 Why Invest ?

Childrens 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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 LETS 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 .

9 Equity C
 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
1997 4,548 This provides a
1998 4,281
1999 5,075
compounded annualized
2000 5,933 return of 10.70%
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 levels.
 Market Timing doesnt matter

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 Invest for long term

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 MORAL

Market timing doesnt 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

Lets take an example

Anil is a businessman. He is married to Tina 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 childrens
education/marriage and buy a bigger house.
In order to hedge against uncertainties of business ,
he has been regularly investing in fixed income
instruments.
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 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, Anil 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 :
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 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
23 Rupee Cost Averaging.
 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 dont have enough money to invest

I am too busy making money to worry about managing
it
I dont 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 every
month for 6 months.
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 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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