investing in stock mkt
TRANSCRIPT
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Investmentsfor your Future
The Steady Route to Financial
GrowthA Sharekhan First Step Initiative
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The NeedforInvestments
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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
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Impact of Inflation
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Age and Investment Stages: It’s aboutTime
Fullydependen
t onSalary
Fully
dependenton
Start Career
Marriage
Buying a House
Children’sEducation
Retirement
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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
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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?
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Children’sEducation
• 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?
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Children’sEducation
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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?
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Retirement
Source : DSP ML
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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
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InvestmentOptions
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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)
ULIPs
Others Exchange Traded Funds
Commodities
Precious Metals
Real Estate
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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
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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
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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
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Comparing Investment Returns…
*Interest returns as CAGR for a 20-year period from 1985 to 2005Source: The Economic Survey 2007-2008
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Why Equities?
If you invested Rs. 5,000 every month for 20years…
Gold
@ 8% p.a.
Rs. 27 Lakh
FDs
@ 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 …
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Aim for HIGHRETURNS Settling for Fixed Returns to
avoid Risk is actually a Bigger Risk
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Guidelines toInvesting in Equities
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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%
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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
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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
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“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
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“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%
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TIP #1
Start EARLY Your money will keep working for you
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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
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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…
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The Power of Compounding
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TIP #2
Invest REGULARLYEven a small amount will grow into a formidable sum over
time
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How Does This Work?
Vijay
Age: 25 Age: 45 Age: 60Invested Rs 5,000 everymonth
No Investment
Rs 5 Crore
Ajay
Age: 25 Age: 40 Age: 60No Investment Invested Rs 10,000 every
month
Rs 1.23 Crore
Rs 12 Lakh Invested
Rs 24 Lakh Invested
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TIP #3
Think LONG-TERM Ignore Short -Term Fluctuations, Focus on MultiplierEffect
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‘Market Timing’ does not matter in the Long-Term
*For historical performance of Sensed over 25-years from 1980 to 2005
Source: ICRA
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TIP #4
Be Disciplined Sound Principles for Investing in Equities/Stocks
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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.
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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.
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To sum up…
1.Start Early
2. Invest Regularly
3.Think Long-Term
4.Be Disciplined
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How
Sharekhancan Help You
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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)
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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.
178
3 Team, Research Networth StockBroking 150
* The Top 1- MostRead
Analysts in July, 2008by
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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
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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
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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
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Thank You
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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
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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
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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
SIP
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Access Recommendations from Top
Picks
• 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
Demo
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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