As Indians, we are generally risk averse towards our investments. We believe that our money should be protected at any cost and there should be no risk involved. Hence, we agree to settle down for investments that seem to offer a guaranteed return which in reality does not beat inflation and hence devalues the money in the long term.

1. Start small,
but make a start now
As Indians, we are generally risk averse towards our investments. We believe that our money
should be protected at any cost and there should be no risk involved. Hence, we agree to settle
down for investments that seem to offer a guaranteed return which in reality does not beat
inflation and hence devalues the money in the long term.
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2. In a nut shell, very few people in India are investing in Mutual Funds.
What could be the reasons?
• Mutual Funds are risky. Even the advertisements carry
“Mutual Fund investments are subject to market risk“
• We don’t know much about stock market, equities or mutual
funds
• My father invested only in FDs, Gold, Real estate and LIC
• I truly believe real estate gives better returns than any other
investment option
• Don’t know whom to approach for help or assistance
• The process of investment is complicated
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3. The moment you think of equity, the following questions would surely cross your mind: - “How are
the markets doing?”, “Can you tell me the best company to invest in?”, “Since the markets are going
down, should I start selling my equity investments?”
Most of the people visualize “Equity Investment” as sitting in front of the trading screen watching
business news channel and actively buying & selling of stocks. The other form of equity investing is
waiting for the “tips” or “insider information” to make a killing in the short run by investing into such
companies.
No wonder then that the wise men compared investing money in stock market to betting money in
horse race. In both these cases, you are staring at the screen with a hope that the horse/stock on
which you have put your money should win. In most cases, majority of the people lose money and
very few “lucky” ones make the fortune. But next day it’s uncertain again. So equity investments are
very risky.
We fail to differentiate the basic difference between speculation (in common terms you can
relate to gambling) and investment.
When the concept of speculation or gambling is involved, one person’s gain is other person’s loss. The
outcomes are quick and the parties involved would know whether they have made or lost the money.
Investment is a scenario where it would be win-win situation for all the parties involved. The outcome
may take longer but the benefits are worth the wait. When an investor invests money in a growing
business, he will have to give time to the business to perform and start reaping the benefits in years
to come. One can relate this to sowing a seed and nurturing before reaping the fruit. Investing is a well
evaluated and disciplined process.
Equity Investment
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4. The power of equity investment:
Building wealth through equities requires tremendous patience and discipline. Remember, Rome was
not built in a day. While the great economist Keynes quoted, “in the long run, we are all dead”, it is
equally true that in the short run we are blind and clueless about the course of stock markets.
Some of the success stories in equity investments are given below;
The top performing stocks during the period of 2004 – 2015
Stock
Closing Price (Rs) Compounded
Annualized
Growth Rate
(CAGR)
25-Aug-04 10-Aug-15
1 TTK Prestige 16 3,927 65%
2 Eicher Motors 186 20,417 53%
3 Havells India 3 277.8 51%
4 Supreme Industries 19 651.95 38%
5 Shriram Transport Finance 26 884.95 38%
6 Godrej Consumer Products 52 1400.3 35%
7 Sun Pharma 39 841.55 32%
8 Bata India 61 1,184 31%
9 Bosch Ltd 1,484 26,003 30%
10 TCS 247 2,521 24%
The bigger challenge is spotting a potential multi-bagger stock. Identifying the next TTK Prestige or a
Sun Pharma today to make a windfall requires astute stock picking skills. If the decision goes wrong,
the risk involved could be higher and might result in capital erosion. The risk is always higher when
you invest your money in a single stock or a combination of few stocks. How do we reduce this risk?
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5. Mutual funds are run by a team of professionals called the Fund management team. Their expertise is
to follow the performance of various companies & sectors closely and identify the future TTK Prestige
or Havells India, so that a basket of stocks are selected.
Investing in a single share or pool of few shares can be very risky as it is very difficult to identify the
next big success story. Hence, Mutual funds become a viable alternative to investing in equity yet re-
ducing the risk. Mutual Funds generally are made up of a combination of 40 to 60 stocks (the number
of stocks in a fund can vary based on the investment objective or the fund management style) in one
fund that helps investor diversify the risk.
Isn’t it better to bet on a team than on a single player!
In a diversified portfolio, the non-performance of few stocks or sectors would be taken care of by the
performance of performing stocks/sectors which helps in balancing returns.
Equity Mutual Funds
Equity mutual funds come in various categories;
• Large cap funds
• Diversified equity funds
• Mid cap / Small cap funds
• Sectoral funds
• Thematic funds
All these funds differ in terms of investment objective. In Large Cap funds, the fund manager looks at
investing in top 50-60 listed companies (based on free float market capitalization) in BSE/NSE. The
risk involved is least when compared to other types of mutual funds. Diversified equity funds would
have a combination of Large cap, Mid cap and Small cap stocks. Fund managers actively allocate be-
tween these 3 categories.
When an investor is looking at investing in Equity mutual funds, it’s always suggested that majority
of investments should go into exiting equity large cap funds and diversified equity funds.

6. “Little drops of water make the mighty ocean”
Systematic Investment Plan (SIP) is nothing but small chunks of money invested on a pre-set date
every month into specific mutual fund/funds. One of the best ways of investing in Mutual Funds is
through Systematic Investment Plans (SIPs) as it brings in an investment discipline for the investor.
SIPs help to achieve financial goals by investing small sums of money on a monthly basis that even-
tually leads to accumulating the required corpus for reaching the goal.
• The key advantage of SIP is Rupee Cost Averaging:
When a date of investment is pre-set, an investor need not worry about the timing of the market but
what’s important is how much time invested in the market. The concept of rupee cost averaging
eliminates the need to time the market i.e. an investor simply don’t have to try to catch the market
lows to buy and market highs to sell. SIP enables an individual to buy more units when the price is low
and fewer units when the price is high, thereby averaging the purchase price.
Systematic Investment Plan (SIP)
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7. Illustration of rupee cost averaging:
Declining market (Amount in Rupees)
Date of investment Amount Invested NAV of the fund Units bought
1st Jan 1000 25 40
1st Feb 1000 20 50
1st Mar 1000 17 59
1st Apr 1000 13 77
1st May 1000 9 111
Total 5000 84 337
• The average NAV last 5 months would be ( 84/5): Rs. 16.80
• But the investor has invested Rs. 5000 and he is holding 337 units in hand. In this case the
average unit cost(NAV) would be ( Rs. 5000/337 units): Rs. 14.84 per unit
Rising market (Amount in Rupees)
Date of investment Amount Invested NAV of the fund Units bought
1st Jan 1000 25 40
1st Feb 1000 35 29
1st Mar 1000 42 24
1st Apr 1000 47 21
1st May 1000 50 20
Total 5000 199 134
• The average NAV in last 5 months would be ( 199/5): Rs. 39.84
• But the investor has invested Rs. 5000 and he is holding 134 units in hand. In this case the av-
erage unit cost (NAV) would be ( Rs. 5000/134 units): Rs. 37.44 per unit
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8. Average SIP returns of 5 funds over 10 years
1998 - 2008 1999 - 2009 2000 - 2010 2001 - 2011
32.19% 19.00% 28.14% 27.27%
2002 - 2012 2003 - 2013 2004 - 2014 2005 - 2015
21.41% 16.78% 12.99% 16.46%
The chosen schemes are: HDFC Equity Fund, HDFC Tax Saver, HDFC Top 200, Reliance Growth, Tata
Pure Equity Fund. Source of NAV is from www.mutualfundsindia.com. The performance period for the
10 year cycle is between April to March.
Historically, at different 10 years investment cycle, none of the funds have given negative returns.
SIP Performance of selected mutual fund schemes
Name of the Fund
Montly
Investment
(Rs.)
Total amount
invested
(in Rs. Lakhs)
Current value of
the investment
(in Rs. Lakhs)
Returns
HDFC Equity Fund 10000 12.00 32.48 17%
HDFC Tax Saver 10000 12.00 30.28 16%
HDFC Top 200 10000 12.00 30.99 17%
ICICI Prudential Dynamic Plan 10000 12.00 31.37 17%
L&T Equity Fund 10000 12.00 30.81 17%
Reliance Growth 10000 12.00 30.80 17%
Reliance Equity Opportunities 10000 12.00 38.00 20%
Reliance Tax Saver 10000 12.00 33.27 18%
Tata Pure Equity Fund 10000 12.00 28.20 15%
*Monthly Investment of Rs.10,000 considered for a period of 10 years from April 01, 2005 to March 01, 2015 (120 months).
The investment is assumed to be made on the 1st
of every month. Returns shown are compounded annualised (CAGR).
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9. Linking SIP is the best way to accumulate money for realizing specific financial goal. Let’s assume
the current cost of an engineering degree is Rs. 4 Lakhs and an investor is planning for his daughter’s
education 15 years from now.
Current cost of engineering Rs. 4 Lakhs
Inflation 7%
Cost of engineering 15 years from now @ 7% inflation Rs. 11 Lakhs
“Where do I get the money from?”
It’s a big worry, when expenditure like this suddenly appears in front of us. We always tend to post-
pone the investment decision and when the moment of truth arrives we think of this question “where
do I get the money from?”
Today a movie ticket would cost about Rs.250 and a family of 3 people would spend Rs.750 and if
popcorn combo about cost about Rs.500, we are starting at a total expenditure of Rs.1250. Dinner post
movie might cost about Rs.1000.
SIP and Financial goals
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10. One outing over week end might cost about Rs.2250
Forgoing “One movie and a dinner with family” and saving up that money once a month, could get
you Rs. 11 Lakhs over 15 years.
• Rs. 2300/- Invested every month in a mutual fund over 15 years.....
• Would accomadate to Rs. 11 Lakhs
• Assumed Rate of 12% p.a.
Starting an SIP and linking it to a specific financial goal, would always help an individual achieve the
dreams and aspirations.
We always tend to get charged up when we come across something interesting but unless we take
action the status quo in our life would continue as it is. One of the many reason for not taking action
is “I don’t know where to start from?”.
One way to start is to identify your financial goals and find out how much you need to invest every
month. Visit us at www.aramanagementsolutions.com, we will help you in defining your financial
goals and give you comprehensive solutions for the financial goals you have in mind.
The crux is “Start Small, but make a start now”.
Saving for the Future
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11. Disclaimer:
Mutual Fund Investments are subject to market risks, please read Scheme Information
Document before investing. Past performance may or may not be sustained in future.
MutualFundUnitsinvolveinvestmentrisksincludingthepossiblelossofprinciple.The
information contained herein should not be altered in any way, transmitted to, copied
or distributed, in part or in whole, to any other person or to the media or reproduced in
any form.Past performance is not indicative of future performance. The future value
of investments may rise and fall with changes in the market. ARA Management Solu-
tions Pvt Ltd is not responsible for any error or inaccuracy or for any losses suffered on
account of information contained in this report. This report does not purport to be an
offer for purchase and sale of mutual fund units or any other financial products. M/S
ARA Management Solutions Pvt Ltd or its employees cannot be held liable for any loss
or sufferings incurred because of any of these investments.The information provided
in this document is of a general nature and has been prepared without taking account
of Investors personal needs, financial circumstances or objectives. The examples are
hypothetical and are not meant to illustrate the circumstances of any particular in-
dividual. Before acting on this information, Investor should consider the appropriate-
ness of the information, having regard to Investor’s needs, financial circumstances
and objectives. Investor should read the relevant Product Disclosure Statement and
consider if the product is right for him.

12. About ARA Management Solutions:
ARA is an independent investment consulting company based in Bangalore. We provide
flexible, end to end solutions to Individuals and Families to enable them to achieve their financial
goals & objectives. We also assist Trusts, Associations and Companies in optimal utilization of their
cash flows by structuring an ideal balance between safety and liquidity.
The foundation of ARA was laid with a single minded, client centric approach. Managing wealth has
been our business practice as well as personal passion. While seeking to actively engage with our
clients in their wealth creation process, we intend to disengage them from the associated
complexities of the same.
As an independent company not owned by or affiliated with any Brokerage or Investment Group, our
aim is to help our investors optimize their portfolio returns. We firmly believe that we can grow only
if our clients grow. Rest assured, we strive to protect our clients’ financial interests with utmost
seriousness.
Email : support@aramanagementsolutions.com
www.aramanagementsolutions.com
Ph: +91 80 4098 1827
S – 05 , Concourse, Lower Ground Floor, ITPB, Whitefield, Bangalore - 560066.
Mobile: +91 95388 84304
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ARA Management Solutions Pvt. Ltd