Rs.15,000/- p.m. What is an Average Income of an Middle-Class House-hold?
Rs.5,000/- p.m. How much can a person save on a regular basis?
If a person can save Rs.5,000/- per month What will be his wealth when he retires? Assuming: He increases his investments by 5% every year Invests in an Asset class that gives returns of 20%
At Age 60 his wealth would have been Rs.27 Crores
Starting Early Give time to your investments rather than timing Assumptions: (a) Savings grows at 5% annually (b) Returns assumed at 20% CAGR Give time to your investments rather than timing 4.90 Crores* 27 Crores* 40 years 25 years 60 years Rs.62 lacs Rs.57 lacs Total Amount Saved (appx.) 20 years 35 years Saving Years till age 60 Rs.15,000/- Rs.5,000/- Savings - Monthly SIP 40 25 Savings Starting Age Shyam Ram
<ul><li>Builds wealth over the long term </li></ul><ul><ul><li>Just Rs. 1500 per month invested for 17 years @10% would grow to Rs. 8 lacs… could be used for your daughter’s marriage </li></ul></ul><ul><li>Take advantage of market volatility </li></ul><ul><ul><li>Buy more when the markets are down </li></ul></ul>Invest Regularly Rs. 10,000 worth of Gold bought every month Highest price Lowest quantity Lowest price Highest quantity 20 grams 15 grams
<ul><li>Myth : Timing is essential to generate high returns </li></ul><ul><li>Reality : It is the time and not the timing that matters </li></ul>Invest Regularly <ul><ul><li>Is it worth the risk or the tension? </li></ul></ul><ul><ul><li>Who can time the market to perfection? </li></ul></ul><ul><ul><li>Not even the experts can !! </li></ul></ul>On the worst day to buy (highest sensex each yr) The result Invested a fixed amount in BSE Sensex annually for 25 yrs On the best day to buy (lowest sensex each yr) 15% p.a. 17% p.a.
<ul><li>It is the small drops that make an ocean!! </li></ul><ul><li>Relieves you of the last minute pressure </li></ul><ul><li>Slow and steady wins the race </li></ul><ul><ul><li>E.g. Split your Sec 80C investments into smaller amounts and invest every month </li></ul></ul><ul><li>Reduces the risk of investing at the wrong time </li></ul><ul><ul><li>Difficult to predict the market and know when is the right time </li></ul></ul>Invest Regularly We earn regularly; We spend regularly Shouldn’t we also invest regularly?
<ul><li>…… .It all adds up! </li></ul>A small amount invested regularly can grow to substantial lumpsum Rs.21.7 lakhs 30 Rs.1000 invested every month for 30 years @10% Invest Regularly
<ul><li>Earn more…it can make a big difference </li></ul>One time investment of Rs.1 lakh invested for 30 yrs @ 6% 5.7 lakhs @ 10% @ 15% 17.45 lakhs 66.2 lakhs EARN MORE
Power of Compounding - QUIZ <ul><li>Rs. 10,000 invested every month for a period of 30 years </li></ul><ul><li>At 8% - </li></ul><ul><li>At 15% - </li></ul><ul><li>At 20% - </li></ul>1.5 crores 7.0 crores 23 crores Postal Recurring ?????? ?????? EARN MORE
The Formula for Creating Wealth Make your money work hard for you Earn More Create Wealth Start Early Invest Regularly
The Million Dollar Question I am convinced that I should save and invest regularly, but the million dollar question is… Where should I invest?
Risk Return Spectrum Savings Bank/ FD Liquid Funds PPF, NSC, KVP, PO Deposits, RBI Bonds Debt Funds Gold Real Estate Equity Risk Return potential Low High Low High Note: The 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
Equities- The Most Attractive Asset Class Equities have outperformed all other asset classes in the long run - globally as well as in India Source : CLSA Cumulative annualised returns (1980 - 2004)
Do you agree? Which product among all above has the potential to create greatest wealth for you? Equities …
Risk?? Returns are unsure! Equity – owners’ risk Volatility of returns Market Risk Sentiments in ST, Herd Mentality
Investor’s Psyche - Wrong emotion dominates at wrong time Fear Hope The Cycle of Fear, Greed & Hope Greed
<ul><li>Equity market (represented by BSE Sensex) has outperformed all other investment avenues </li></ul>Selecting Right Asset Class Sensex Company Deposits Bank Deposits Inflation Gold
In past 27 years BSE Sensex has given about 19.5% returns Past Performance (BSE Sensex) <ul><li>This is in spite of … </li></ul><ul><li>Two wars </li></ul><ul><li>At least three major financial scandals </li></ul><ul><li>Assassination of 2 prime ministers </li></ul><ul><li>At least 3 recessionary periods </li></ul><ul><li>10 different governments and </li></ul><ul><li>An unfair share of natural disasters </li></ul>1,30,00,000 13,000 2006 1,00,000 100 1979 Investment Rs. Sensex Year
Using the Wisdom We can direct our savings in such a manner that we create wealth, the way we wish DISCIPLINED SAVINGS + SUFFICIENT TIME + RIGHT ASSET CLASS = S mart I nvestor’s P reference
What is SIP <ul><li>Invest a fixed amount, at regular, predetermined intervals and use the market fluctuations to your benefit </li></ul>11.981 11.98 Average Cost per unit 13.67 Average NAV 1001.75 12000 TOTAL 71.43 14 1000 1-Dec-05 12 100.00 10 1000 1-Nov-05 11 71.43 14 1000 1-Oct-05 10 58.82 17 1000 1-Sep-05 9 71.43 14 1000 1-Aug-05 8 52.63 19 1000 1-Jul-05 7 83.33 12 1000 1-Jun-05 6 45.45 22 1000 1-May-05 5 55.56 18 1000 1-Apr-05 4 166.67 6 1000 1-Mar-05 3 125.00 8 1000 1-Feb-05 2 100.00 10 1000 1-Jan-05 1 Units Alloated NAV Monthly Investment Dates