Why invest?

• Different financial goals

– Children’s education/ marriage
– Medical emergency
– Retirement
– Aspirational goals - House, Foreign holiday
– Other obligations
 Time value of money
A fixed monthly expense of INR 30,000 p.m today over time…..

Inflation assumed @5%

 Time value of money
While the value of your savings erodes over time, thanks to inflation

Inflation assumed @5%

The expense - savings mismatch

?
Investors need to save regularly into
assets that can beat inflation to meet
their financial goals.
Performance of various asset
classes
Cumulative annualised returns of different asset classes
(1985 - 2006)

Equity 17.9

G Sec 11.3

Bank FD 10.4

Gold 7.2

Inflation 6.8

0 5 10 15 20

Equities - clearly the best bet in the long term

Market Timing- Does it matter?
Market Timing: Does it matter?
Say, an investor invests 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
1998 4,281
1999 5,075 This provides a compounded
2000 5,933 annualized return of 10.70%
2001 4,438
2002 3,713
2003 5,839
2004 6,603
2005 9,398
2006 13,399

Investments into the Sensex at prevailing levels

Market 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 2,745
1997 3,225
1998 2,764
1999 3,060
2000 3,594 This provides a compounded
2001 2,600 annualized return of 11.13%
2002 2,834
2003 2,924
2004 4,505
2005 6,103
2006 8,929

Investments into the Sensex at prevailing levels

Market Timing: Does it matter?
Say, an investor invests INR 10,000 in equities for 10 consecutive
years on March 31st, every year, irrespective of market levels.

Year Sensex Value

1996 3,367
1997 3,361
1998 3,893
1999 3,740
2000 5,001 This provides a compounded
2001 3,604 annualized return of 11.50%
2002 3,469
2003 3,049
2004 5,591
2005 6,493
2006 11,280

Investments into the Sensex at prevailing levels

 Market Timing doesn’t matter
Portfolio value
Invest for the long term
 Moral:
Market Timing doesn’t help!!
…. it is the time in the
markets that matters
Case Study-Systematic Investing

Little Drops of Water Make the

Mighty Ocean
Systematic Investment Plan
• 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 children’s education/
marriage and buy a bigger
house
• In order to hedge against
uncertainties of business, he
has been regularly investing
in fixed income instruments
Systematic Investment Plan
• The Lower interest rates over
the years has 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
annualised returns for
different asset classes for
details)
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 :
 Systematic Investing, An
Example
Rahul & Viru are two friends. Rahul decides to invest using SIP whereas Viru decides
to make lump sum investment
Rahul's Investment Viru's Investment
SIP Lump Sum
Month NAV * Amount(Rs.) Units Amount(Rs.) Units
Jan-07 9.345 1000 107.01 12000 1284.11
Feb-07 9.399 1000 106.39
Mar-07 8.123 1000 123.11
Apr-07 8.750 1000 114.29
May-07 8.012 1000 124.81
Jun-07 8.925 1000 112.04
Jul-07 9.102 1000 109.87
Aug-07 8.310 1000 120.34
Sep-07 7.568 1000 132.14
Oct-07 6.462 1000 154.75
Nov-07 6.931 1000 144.28
Dec-07 7.600 1000 131.58
Total 12000 1480.60 12000 1284.11
•Disclaimer: The illustration above is merely indicative in nature and should not be construed as investment advice. It does
not in any manner imply or suggest performance of any Schemes(s) of UTI Mutual Fund. Rupee Cost Averaging neither ensures
you profits nor protects you from making a loss in declining markets. Please read factors.
•NAV as on the 10th of every month. These are assumed NAVs in a volatile market of a hypothetical scheme
 Systematic Investing, An
Example
10 9.35
9.40 9.10
8.75 8.93
9
8.12 8.01 8.31
8 7.57
6.93
7.60

7 6.46

6
5
4
3
2
Jan- 07 Feb- 07 Mar - 07 Apr - 07 May- 07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct - 07 Nov- 07 Dec- 07

106.39 154.75
units units

When the price is highest, When the price is lowest,

you buy the least number of units you buy the highest number of units
 Systematic Investing, An
Example
Viru ‘s Average
Cost Price (lump sum)
10
9
8
7 Actual Price Rahul’s Average
Movement Cost Price (SIP)
6
5
4
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec-
07 07 07 07 07 07 07 07 07 07 07 07
Rahul’s average unit price (SIP) = 12000/1480.60 = Rs. 8.105
Viru’s average unit price (lump sum) = Rs. 9.345
Rahul’s Saving = Rs. 1.24 per unit

Rahul’s Systematic Investing helps him purchase 196.49 units more

at price which is Rs. 1.24 lower than Viru’s
 Why Systematic Investing

• The Goal of Most Investors it 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:
– Time Consuming
– Risky
– and Almost Impossible

• A more successful strategy is to adopt 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:

– You buy more when the market is down
– You buy less when the market is up
– Over time the market fluctuations are averaged
– Most likely you will realise a saving on the cost per unit
– This may lead to HIGHER RETURNS
Three common Reasons for not
Investing
• I don’t have enough money to invest
• I am too busy making money to worry about managing it
• I don’t have the time or expertise to follow the market movements
and make investments at the right time
 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.
 Presenting

UTI
Systematic
Investment
Plan…
An early & regular investment today,
leads to a prosperous tomorrow
Convenience
¾ Accumulate Wealth in a much
relaxed manner - UTI SIP can be
started with as little as Rs. 500/-,

¾ Reduce the Risk - UTI SIP helps you average out

your cost. It is best way to participate in equity
markets by reducing risk,

¾ Unlimited Choice – Through SIP, UTI MF offers,

host of schemes under Equity, Balanced & Income
Fund categories.
Convenience …..contd.

¾ Auto Debit Facility (Direct Facility) - with the

banks with which UTI AMC has tie up (currently with
UTI Bank),
¾ Auto Debit (ECS Debit) - Payment through ECS via
RBI select branches across cities,
¾ Post Dated Cheques - Number of cheques reduced
to 6 from 12.
How to make UTI SIP
work for you ?
¾ Set your financial goal

¾ Identify the scheme

¾ Decide the SIP amount

¾ Look for a long-term commitment

¾ Aim for the big picture

¾ Start investing
 SIP RETURNS - UTI
SCHEMES
UTI Infrastructure Fund
SIP Investments 5 Years 3 Years 1 Year
SIP SIP SIP
Total Amount Invested (Rs.) 36,000.00 12,000.00
Market Value as on February 29, 2008 64,110.00 13,419.00
Returns (Annualised)*% 41.17% 22.36%
Lumpsum Investment -CAGR 48.68% 55.23%
Retirement Benefit Pension Fund
SIP Investments 5 Years 3 Years 1 Year
SIP SIP SIP
Total Amount Invested (Rs.) 60000 36,000.00 12,000.00
Market Value as on February 29, 2008 86245 42,922.00 12,702.00
Returns (Annualised)*% 14.46% 11.72% 10.91%
Lumpsum Investment -CAGR 17.81% 14.66% 18.59%
Thank You