investing in stock mkt

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Investmentsfor your Future

The Steady Route to Financial

GrowthA Sharekhan First Step Initiative

The NeedforInvestments

The Expense of Living

As Inflation rises, the prices for goods and servicesincreases…

Over the last 20 years, the price of milk has grown 11% p.a.--from Rs2 per litre in 1984 to Rs 27 per litrein 2008

Impact of Inflation

Age and Investment Stages: It’s aboutTime

Fullydependen

t onSalary

dependenton

Start Career

Marriage

Buying a House

Children’sEducation

Retirement

Start Career

Plan taxes throughPPF and ELSS

Start a SIP in EquityDiversified Funds orESOPS

HOW TO I NVEST?

• Begin creating Wealth– Savings

– Tax Planning

• Life stage expenses:Gadgets, lifestyleaccessories, vehicle etc.

• How it Works: Early stageregular investmentsthrough SIPs and thePower of compounding

MarriageBuying a House

• Wealth accumulation– Savings

– Tax Planning

• Life stage expenses:– Setting up a house

• How it works: Planning foryour goals and systematicinvestments

For buying a House:Set aside a maximumof 40% of net incometowards EMI forHousing Loans.

Build Risk CoverTerm Insurance Policyto cover for liabilities

HOW TO I NVEST?

• Wealth management

• Lifestage expenses:– Children’s education

– Provide life long protection andexpenses for the family

• How it works: Additionalassets upto 15% p.a. canbe created from income

Equity DiversifiedM.F [Maximum 3funds] through SIP

PPF [in child’sname-start from Age1] as per the AssetAllocation arrived atbased on Riskprofiling.

HOW TO I NVEST?

Retirement

• Wealth Preservation

• Making your money work

for you: Preserve capital,earn higher returns to beatinflation and livecomfortably.

• Life stage expenses:Medical or health bills,travel or hobbies

• How it works: As one

approaches the Retirementeriod, the asset allocation

Equities/ DiversifiedM.F./, PPF, IncomeFunds, AlternateAssets likeCommodities and

Gold,, InternationalEquities, Real Estateas per the Risk Profileand Asset Allocation.

HOW TO I NVEST?

Retirement

Source : DSP ML

How fast should you grow?

FixedDepositsgive an

interest of

Inflationrate today isaround 12%

So you needto invest withthe goal of at

least gettinga HIGHER

rate of returns than

the Inflation

InvestmentOptions

What can you Invest in?

Type of InvestmentsAsset Classes

CashSavings Bank Account

Mutual Funds (LiquidFunds)

DebtFixed Deposits

Mutual Funds (Debt Funds)

Equity Shares / Stocks

Mutual Funds (EquityFunds)

Others Exchange Traded Funds

Commodities

Precious Metals

Real Estate

Cash Investment Options

Savings Bank Account: You open a bankaccount and earn a fixed rate of interest onmoney deposited.

e.g. HDFC Bank Savings A/c

Liquid Funds: Liquid Funds typically invest inshort-term, high-quality, fixed-incomesecurities such as Treasury Bills. The earningsthat Liquid Funds provide is determined byshort-term interest rates.

e.g. HSBC Liquid Fund

Debt Investment Options

Fixed Deposits: Deposits placed with any scheduledbank/corporate for a fixed tenure at a pre-determined interest rate .

e.g. ICICI Bank Fixed Deposit : HDFC Ltd. FixedDeposit

Debt Funds: Debt Funds invest in fixed incomesecurities such as bonds issued by companies andgovernment agencies.

e.g. ICICI Prudential Long-Term Plan

Other Avenues

ETF: These are close-ended exchangetraded funds that are listed on any one of thestock exchanges to provide liquidity toinvestors

Eg. Kotak Gold Fund

Commodities: Includes investments in

precious metals, oil and agricultural produce.This can provide an excellent buffer and astrong alternative investment

Comparing Investment Returns…

*Interest returns as CAGR for a 20-year period from 1985 to 2005Source: The Economic Survey 2007-2008

Why Equities?

If you invested Rs. 5,000 every month for 20years…

@ 8% p.a.

Rs. 27 Lakh

@ 10% p.a.

Rs. 34 Lakh

Equities

@ 15% p.a.

Rs. 61 Lakh

If the money grew at __% p.a.

then your corpus would beworth …

Aim for HIGHRETURNS Settling for Fixed Returns to

avoid Risk is actually a Bigger Risk

Guidelines toInvesting in Equities

Prescribed Equity Allocation

Age Band (years) Equity Allocation Other AssetClasses

0 – 25 85% 15%

26 - 35 75% 25%

36 – 45 65% 35%

46 – 55 55% 45%

56 - 65 45% 55%

66 – 75 35% 65%

Understand Yourself...

• Every investment has a risk-reward attached to it.

– This risk-reward will vary based on the Asset Class youchoose (Cash, Debt ,Equity, Commodities, etc)

– Risk-Reward is also dependent on your trading style (day

trading, delivery-based, futures trading)

• Your investment style and allocation for different assetclasses depends on your comfort with taking risk

Which category do you fall into?

Investor– Long-term view

– Invests infundamentally strongcompanies

– Time involvement islow

– Patience is the key

– Typically, has a low riskappetite

Trader– Has both short-term

and long-term views

– Time involvement ishigh

– Discipline is the key

– Typically, has a high-risk appetite

“I want to invest fora secure future, andwant a corpus of some emergencyfunds at all times.”

The Investor

Low to Medium risk-returnWill only invest withsurplus money

Take a long-termview

Follow prescribedallocation

Research stocks

Invest infundamentally strongcompanies

Invest withprofessionally AMC –Mutual Fund/PMS

HOW TO I NVEST?

Expects 15%to 20% return

“I want to get highreturns quickly. And Idon’t mind takingrisks for it”

Trade on short andlong-term basismomentum (1 to 5days) or positional (1to 15 days) basis

Earn returns bytaking high risks

Trading in F&OmarketsMedium to High risk-

return appetite

Comfortable withvolatility andleverage

Looking to makequick profits

HOW TO I NVEST?

The Trader

Aims for higherthan 20%

TIP #1

Start EARLY Your money will keep working for you

When you start makes a bigdifference…

Value at the age of 60

Rs 17.45 lakhs

Rs 12.97 lakhs

Ram invested Rs 1lakh

at the age of 30

Shyam invested Rs 5lakh

at the age of 50

*At 10% Returns

The Power of Compounding

• Interest earns more interest

• Simple interest at 10% p.a. grows as:

100 110 120 130 140 150…

• Compound interest at 10% p.a. grows as:100 110 121 133 146 160…

The Power of Compounding

TIP #2

Invest REGULARLYEven a small amount will grow into a formidable sum over

How Does This Work?

Age: 25 Age: 45 Age: 60Invested Rs 5,000 everymonth

No Investment

Rs 5 Crore

Age: 25 Age: 40 Age: 60No Investment Invested Rs 10,000 every

Rs 1.23 Crore

Rs 12 Lakh Invested

Rs 24 Lakh Invested

TIP #3

Think LONG-TERM Ignore Short -Term Fluctuations, Focus on MultiplierEffect

‘Market Timing’ does not matter in the Long-Term

*For historical performance of Sensed over 25-years from 1980 to 2005

Source: ICRA

TIP #4

Be Disciplined Sound Principles for Investing in Equities/Stocks

The Sound Principles of EquityInvestments

1. Invest in a business you understand

2. Look for positive long-term growth

3. Check if the company you are investing hastrustworthy management

4. Invest in companies that have a sensible price tag

THIS are the only things that matter. Rest is speculation.

The Common MISTAKES in INVESTING

1. Made on ‘tips’ from ‘contacts’

2. Made on a short-term or quick return basis

3. Lack of monitoring of portfolio

4. Inadequate diversification or too diversified

5. Relying only on past performance

6. Trying to time the market

7. Not buying when the markets are down.

To sum up…

1.Start Early

2. Invest Regularly

3.Think Long-Term

4.Be Disciplined

Sharekhancan Help You

Services at Sharekhan

• Sound financial advice based on highlyacclaimed research

• Execution of your investment plan throughconvenient online trading platform and Dial nTrade

• Portfolio Monitoring and support throughcall centre and Relation Manager (for HNI clients)

Sound Financial Advice

• Investment plan based on your risk profile comprising of recommendations from Sharekhan’s research team* for

– Stock Ideas, Top Picks Portfolio

– Mutual Funds

– SIPs

Rank Analyst Broker Readership

1 Research,Sharekhan

Sharekhan 388

2 Vishal, Goyal Edelweiss SecuritiesLtd.

3 Team, Research Networth StockBroking 150

* The Top 1- MostRead

Analysts in July, 2008by

Investment Plan - Execution

Use your investment account with Sharekhan.com to… Buy and sell Shares

Invest in Mutual Funds or apply for IPOs

Start an SIP in Stocks and Mutual Funds

Invest in Sharekhan’s Top Picks recommendations

View your entire portfolio and fund allocation withyour personal Portfolio tracker

Open your Investment Account now!

Meet the Sharekhan Service representative to knowmore about how to invest with Sharekhan

Fill in the account opening form and sign-up

Access our Knowledge Center and Demo Section forstep-by-step assistance on trading online

Start trading online with your linked demat account

Access your real-time updated portfolio and digitalcertificates

Ready to take the First Step?

• Sharekhan First Step is a programme designed toease a new investor’s entry into the FinancialMarkets

• It is a comprehensive support program whicharms you with sophisticated financial information,delivered simply

• At Sharekhan First Step, we understand that yourinvestment choices should last you a lifetime

Thank You

Systematic Investment Plan (SIP)

• Invest regularly as per yourconvenience

• Stock SIP: Invest in your choice of listed

scrips

• Mutual Fund SIP: Invest in funds fromover 19 fund houses

• Backed by Sharekhan Research reportswith recommendations

Stock SIP

• You can start a SIP for stocks andinvest regularly in equities

• With Sharekhan SIP, you canchoose from thousands of listedstocks from one location

• View your online portfolio andchange it based on performance View the Demo

of Sharekhan

Stock SIP

Mutual Fund SIP

• With Sharekhan Mutual FundSIP, choose from Mutual fundsfrom over 19 fund houses

• Mutual fund Advisory Desk -Monthly Newsletters: TopEquity Fund Picks

• With Flexi-SIP, you canchange the duration andamount flexibly based on theperformance.

SIP in MutualFunds

MF Flexi

Access Recommendations from Top

• Top Picks is a selection of the top 12winning stocks selected by Sharekhan’sCentral Fundamental Research team

• Invest directly in Sharekhan’s Top Picks

Basket through Sharekhan.com

• Sharekhan’s selection of Top Picks hasconsistently outperformed the Sensex

Absolute Returns 59.8% p.a

Relative Performance (Sensex) 45.8% p.a.

Top Picks Portfolio Performance

View our

TOP PICKS

Tax Free Income

• Dividend income received on stocks are tax-free

• There is zero capital gain tax on profits of stockinvestment of more than one year

investing in stock mkt

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