Equity objection handeling (rajesh bhutra)

www.prudentcorporate.com
COMMON OBJECTIONS IN EQUITY SELLING

OBJECTION 1Equity Markets are RISKY, I want Safety First. My Bank FD is giving me 9% (Guaranteed) return, Why should I invest in equity

What Is The Meaning Of Safety?
PRESERVING THE CAPITAL
OR
PRESERVING THE PURCHASING POWER

Real Life Example

Normally House hold expense gets double at every 5
years due to CPI and lifestyle inflation
-AGREE??
If Yes, then after 15 years
HH expense of 25000 today will be Rs. 2 Lacs
Money "SAFELY" growing at 9% will be Rs.91062
GUARANTEED LOSS
Biggest Risk in Equity market is “Not investing into it.”
We Feel SAFE But We Are Not.

OBJECTION 2
Let The Market Correct Then I Will Enter

Timing The Market Is Very Difficult

Time Is More Important In Wealth Creation Not Timing

It’s Not Timing It’s Time Into The Market Which Is More Important

In last 15 years market has corrected many times

But it’s almost difficult to predict the next move

Investing and giving a time to investment make much more sense than timing

Market Timing Is Risky

Major returns in equity market is delivered in
few days.

By constantly trying to time the market, chances
of losing those few days are very high.

“World is waiting for market to crash, market is
waiting for your passion to crash.”

People who constantly try to time the market end up getting lesser return than the actual asset class performance

What ifyou MISS BESTDays
Product
Valuationas on 14th July 2014 of Rs 100000 invested for 10 years
Current Value
2 Best days Missed
5 Best days Missed
10 Best days Missed
20 Best days Missed
30 Best days Missed
40 Best days Missed
Sensex
524199
412801
337181
251906
149353
95781
65713
Birla Sun Life Equity Fund - Growth
769417
611452
512141
388639
251137
173938
125811
DSP BlackRockOpportunities Fund -Reg–Growth
646632
570762
466110
357449
235689
168631
125659
HDFC Equity Fund -Growth
875144
768618
645569
498366
324265
230057
168017
While Trying To Time The Market It’s Possible That You Miss Some Of The BEST DAYS

10 Years returns as on 14thJuly 2014

OBJECTION 3
Let The More Clarity Come, Then I Will Invest
“WALL OF WORRY”


Market always reacts in advance.

It goes up or down before the actual event takes place.

Waiting for the clarity may result in paying the premium and lesser returns.

So when odds are in favor of investment, don’t wait for the exact clarity.

People who were waiting for election to get over have missed the rally of 6000 points in Sensex.

People Waited For The Clarity Of Election Result Have Lost 25% Potential Gain


People are still waiting for the exact clarity on how new government delivers.

They surely will get the exact clarity in a times to come.

But that clarity will come with the price.

Interest rate and inflation will come down and economy will grow at higher GDP for sure, but no sense in waiting for that to happen for investing.

OBJECTION 4
I don’t want to invest as the last 3 years returns are not good.
Every time I invest in Equity Fund looking at performance, but after my investments scheme performance deteriorates.

HISTORICAL RETURNS

FUTURE RETURNS

OBJECTION 5
Sentiments are not good, just look at the NEWS.

OBJECTION 6
See, No One Is Investing In Stock Market Right Now.

Rational Behind IRRATIONAL BEHAVIOUR
"Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Sir, John Templeton

Choice is Yours.... When will you invest?
Choice 1:When Market is cheap, attractive but no one wants to invest.
Choice 2:When Market is costly And everyone wants to invest.
OR
A little difficult but It’s the winning
strategy.
Easy but Risky

OBJECTION 7
What if FIIs move out of market?

We think “Achhedin aanewale hai”
FII believe “Achhedin aanewale hai.”
We are proud of our country and its economic power. FII invest in our economic power and earn from it.

Financial Year
FII Flow cr in
Financial Year
FII Flow cr in
1992-93
13
2004-05
44,123
1993-94
5,127
2005-06
48,801
1994-95
4,796
2006-07
25,236
1995-96
6,942
2007-08
53,404
1996-97
8,546
2008-09
-47,706
1997-98
5,267
2009-10
110,221
1998-99
-717
2010-11
110,121
1999-00
9,670
2011-12
43,738
2000-01
10,207
2012-13
140,033
2001-02
8,072
2013-14
79,709
2002-03
2,527
2014-15 **up to april 20, 2014
9,602
2003-04
39,960
Total
717,688
FII Inflow in Indian Equity Market
Source: www.sebi.gov.in

Since last 10 years FII is net seller only in 1 financial year.

FIIs are continuously buying the Indian Equity markets

On daily basis due to the huge volumes of FIIs market may be volatile, but over long term FIIs are interested only in buying.

OBJECTION 8
Markets are at all time high, it can’t move up further.


Sensex may be at all time high, but valuation are not.

One need to keep an eye the valuation measured by P/E ratio to find out weather the markets are cheap or costly

P/E of market swings like pendulum from low to high.

Current PE of market

Min 10.68
Max 28.47
Average 18.31
Bear Market Vs. Bull Market. P/E Historical Band

Current PE of Sensex
We are at very fair valuation
EPS -1389

Sensex Projection
Sensex Projection at 15% EPS growth yoy
Years
3
5
7
EPS
1398
2126
2812
3719
PE
15
31893
42178
55781
18
38271
50614
66937
20
42524
56238
74374
22
46776
61861
81812
Years
3
5
7
EPS
1398
2297
3198
4453
PE
15
34454
47974
66799
18
41345
57569
80159
20
45939
63966
89066
22
50533
70362
97972
Years
3
5
7
EPS
1398
2416
3479
5009
PE
15
36236
52180
75139
18
43483
62616
90167
20
48315
69573
100186
22
53146
76531
110204
Years
3
5
7
EPS
1398
2539
3778
5624
PE
15
38078
56676
84356
18
45694
68011
101227
20
50771
75568
112475
22
55848
83124
123722

OBJECTION 9
I don’t need Mutual Funds, they also go down with market.
Mutual Funds are even not beating Sensex, why should I invest in Sensex?
I can do it on my own, I am educated and intelligent

Just by looking at the picture, I am sure you can understand what the by pass surgery is ..
Now if you have understood what bypass surgery is,
WILL YOU DO IT YOURSELF, If you or any of your member suffer from blockage of coronary artery?

“I can calculate the movement of stars, but not the madness of men.” Sir Isaac Newton

Do you think you are more educated and intelligent than Isaac
Sir Isaac Newton lost his life saving of 20000 British pound in year 1720trying on his own. His loss is equal to approx Rs 18 cr. in today’s context.

Understanding something and doing something is all together different ball game.
Can You Do This On Your Own?

TIME IS MONEY
15-11-96 Sensex 3139
04-07-07 Sensex 14880

TIME IS MONEY
10-11-95 Sensex 3281
17-12-13 Sensex 20612

TIME IS MONEY
19-9-99 Sensex 4618
17-12-13 Sensex 20612

TIME IS MONEY

OBJECTION 10
I want to stop my SIP, as the returns are not good for last 5 years

Equity Investment Is Like Growing A Chinese Bamboo

Scheme Name
Investment of Rs 3000 p.m
3 Years Return as on 17thAug. 2013
Return of same sip continued till June 2014
Total Investment
Value
CAGR
Total Investment
Present Value(SIP)
CAGR
DSP BlackRock Equity Fund -Reg -Dividend
180000
144424.034
-14.56
235000
280594.4994
9.41
Sundaram SMILE Fund -Reg -Growth
180000
147368.6724
-13.27
235000
388177.7545
27.46
Reliance Vision -Growth
180000
150969.305
-11.71
235000
336722.3622
19.41
Reliance Growth -Growth
180000
158357.8452
-8.6
235000
334853.0252
19.1
Tata Equity P/E Fund -Plan A -Growth
180000
156759.3505
-9.27
235000
362856.0641
23.61
Birla Sun Life Mid Cap Fund -Plan A -Growth
180000
158989.4651
-8.34
235000
355710.0658
22.49
Birla Sun Life Equity Fund -Growth
180000
167367.8281
-4.93
235000
373589.9121
25.27
HDFC Growth Fund -Growth
180000
161366.479
-7.36
235000
320439.0583
16.66
Kotak 50 -Growth
180000
170741.2672
-3.59
235000
316645.7666
16
HDFC Top 200 -Growth
180000
164256.1967
-6.18
235000
341234.7885
20.15
180000
160094.2281
-7.88
235000
355923.0827
22.52
DSP BlackRock Small and Midcap Fund -Reg -Growth
180000
156913.9018
-9.2
235000
370270.4171
24.76
DSP BlackRock Top 100 Equity Fund -Reg -Growth
180000
173176.5954
-2.63
235000
324793.8795
17.4
SIP Returns –Similar To Chinese Bamboo
Normally average Investor stops SIP after 3 or 5 years if returns are not good or negative

SIP Returns –Similar To Chinese Bamboo
Normally average Investor stops SIP after 3 or 5 years if returns are not good or negative
Scheme Name
SIP of Rs 5000 per month
5 Years Returns as on 17th Aug, 2013
Same SIP continued till June 2014
Total Investment
Value
CAGR
Total Investment
Present Value(SIP)
CAGR
DSP BlackRock Equity Fund -Reg -Dividend
300000
256032.5095
-6.42
355000
445344.8249
7.78
Sundaram SMILE Fund -Reg -Growth
300000
283595.6551
-2.28
355000
669740.8686
21.93
Reliance Vision -Growth
300000
285288.6862
-2.04
355000
570522.8379
16.34
Reliance Growth -Growth
300000
307004.9518
0.94
355000
582802.8849
17.08
Tata Equity P/E Fund -Plan A -Growth
300000
311001.0707
1.47
355000
646546.38
20.7
Birla Sun Life Mid Cap Fund -Plan A -Growth
300000
316638.1225
2.2
355000
635071.5829
20.07
Birla Sun Life Equity Fund -Growth
300000
316720.5461
2.21
355000
640639.4402
20.38
HDFC Growth Fund -Growth
300000
323667.4645
3.1
355000
573079.4047
16.5
Kotak 50 -Growth
300000
323907.6461
3.13
355000
541776.1196
14.55
HDFC Top 200 -Growth
300000
331457.1311
4.07
355000
617384.8661
19.09
300000
332999.1098
4.26
355000
661724.1197
21.51
DSP BlackRock Small and Midcap Fund -Reg -Growth
300000
335221.6794
4.53
355000
706661.2381
23.81
DSP BlackRock Top 100 Equity Fund -Reg -Growth
300000
336295.7508
4.66
355000
567407.4167
16.15

Objection 11
I want to save for my Son’s education / My retirement; why should I invest in equity wherein there is no surety of returns?


People normally invest into PPF, Fixed Deposits for their children’s future and own retirement.

These goals can not be postponed or cancelled, so we want surety of returns from and return of capital.

The rational is they need safety and are scared of the volatility.

Equity prices and returns are volatile over short period of time, however in long run they are predictable.

PPF returns

ELSS Vs. PPF

Comparison of ELSS vs. PPF

No of Years
1 Year
2 Year
3 Year
5 Year
7 Year
10 Year
12 Year
Maximum Return
127403
270093
402808
842701
1242258
2586580
6075047
Minimum Return
106883
223885
331807
642718
891962
1859307
3423549
Average Return
118748
252435
378794
750390
1094194
2209632
4569127
Sensex
114938
244380
361530
685795
977073
1923900
3352874
PPF calculated @ Actual rates
108755
227133
355517
644107
981009
1595008
2093229
(Past performance may or may not sustain in future)
Summery

Case Study –Retirement Planning
•
Name Raj Sharma
•
Age 35
•
Retirement Age60 Years
•
Life Expectancy 80 Years
•
Current Monthly Expense25000
•
Inflation 8%
•
Risk free return after retirement9%
•
Monthly Expense at retirement 171,212
•
Corpus Required for the Retirement 45,330,143

Expected Return
8%
12%
15%
18%
20%
Monthly Investment required
49550
26630
16444
10069
7241
Years to Save –25Retirement Corpus needed 4.53 Cr.
Power of compounding is the 8thwonder of world.

Case Study –Retirement Planning
•
Name Anil Kumar
•
Child Name : Samir
•
Child Age5 Years
•
Higher Education Age18 Years
•
Current HE expense1000000
•
Inflation 8%
•
Expected HE cost after 13 years2719623

Years to Save –13Child Education Fund Required 27.19 Lac.
Power of compounding is the 8thwonder of world.
Expected Return
8%
12%
15%
18%
20%
Monthly Investment required
10111
7600
6111
4902
4228

OBJECTION 12
Are these kind of returns possible in long term?
What if the fund chosen by me doesn’t perform and performs worse?

THANK YOU

Equity objection handeling (rajesh bhutra)

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