Instalment Investment - ICICI...
Transcript of Instalment Investment - ICICI...
SIP or Systematic Investment Plan offered by Mutual Funds is like a GOOD EMI
EMI Instalment
= GOOD EMI Investment
=
WHAT are SIPs?
SYSTEMATIC INVESTMENT PLANS (SIPs) MADE SIMPLE
WHAT WHYWHEREWHENWHAT
are SIPs? SIPs?
to invest via SIPs? to start a SIP? not to do in SIPs
WHAT are SIPs?
Ÿ
investing in mutual funds
Ÿ
similar to a Bank Recurring Deposit- Regular investment in one or multiple schemes
ŸSIPs or Systematic Investment Plans are one of the
SIPs are a way of REGULAR AND DISCIPLINED
INVESTING PROCESS
BEST WAYS TO INVEST IN A MUTUAL FUND
WHY SIPs?
ŸCHEAPER ON THE WALLET
ŸREGULAR AND DISCIPLINED INVESTMENT
Ÿ CREATE WEALTH OVER LONG RUN
ŸMAKE MARKET TIMING IRRELEVANT
Ÿ BENEFITS OF COMPOUNDING
- Can be as low as R 500 per SIP per month
Potential To
- Ensures that one invests at all points of time (high as well as low points of the market)- Benefits from Rupee Cost Averaging
Provide
Let us look at some of the above aspects in detail…..
WHY SIPs?
CREATE WEALTH OVER LONG RUN
Create Wealth Over The Long Run(Illustration)
Period Principal R lac
Final Value R lac
@ 10% p.a.
Final Value R lac
@ 12% p.a.
Final Value R lac
@ 14% p.a.
10 years 1.20 2.07 2.32 2.62
15 years 1.80 4.18 5.05 6.13
20 years 2.40 7.66 9.99 13.16
25 years 3.00 13.38 18.98 18.98
^ *SIP of growing @ 10%, 12% & 14% p.a.R1000 per month
A small difference of even 2% in returns can change the final amount drastically
* For Illustration purposes only. These are assumed returns and actual returns may vary. Also, returns may vary with the type of underlying asset class. ^ Systematic Investment Plan at the beginning of the month.
RUPEE COST AVERAGING
Rupee Cost Averaging
Receive when ,vice versa when NAV is higher
more units NAV is lower
Investment (A) NAV (B) No. of Units (A / B) Remarks
R 10000 20 500 Higher NAV ~ Less Units
R 10000 16 625 Lower NAV ~ More Units
Average Cost per unit 17.78
− The cost is thus averaged out as NAV falls
• Longer the SIP period, better the impact of rupee cost averaging• Longer SIP period may also help to lower volatility of returns
Rupee Cost Averaging (Illustration)
Past performance may or may not be sustained in futureFor a 20-year SIP in S&P BSE Sensex ending on Jan 31, 2017. Investment at the start of the monthSource-CRISIL Mutual Fund Research Tool
How cost per unit has dropped over long investment horizon
S&P BSE Sensex
Ending Value 27,656
Average Value 7011
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Starting Value 3382
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Sensex rose fr
om 3382 on Jan 31, 1997 to 27,656 on Jan 31, 2017
Average cost of a unit o
ver the 20-ye
ar period was only R
s.7011
BUT
BENEFITS OF COMPOUNDING
Benefits of Compounding (Illustration)
Longer you stay the wealthier you may be
SIP of R 1000 per month growing @12% p.a.*
Experience the Magic of COMPOUNDING
Period Principal R lac
Final Value R lac
Growth of Principal (Compounding Effect)
10 years 1.20 2.32 almost 2 times
15 years 1.80 5.05 almost 3 times
20 years 2.40 9.99 over 4 times
25 years 3.00 18.98 over 6 times
* For Illustration purposes only. These are assumed returns and actual returns may vary. Monthly investment at the beginning of the month.
WHERE to invest via SIPs?
NO RESTRICTION OF ANY ASSET CLASSfor commencing a SIP
MORE POPULAR FOR EQUITY as an asset class because…− The asset class is relatively more volatile and − SIPs help to even out volatility by purchases made across market cycles
EQUITY SIPs ideally should be long term of 5 years and above
SIPs IN FIXED INCOME may be for short to medium term
FUND HOUSEand its
Points of Presence
INTERMEDIARYBank, Distributor,
Independent Financial Advisor (IFA)
ONLINE Through
*investment portals* of Fund House/ Distributors
Key Step is KYC or Know Your Customer form
KYC form available with mutual fund, distributors, RTA or KRA (KYC Registration Agency)
Three Modes to Invest
WHEN to start a SIP?
WHEN to start a SIP?
NO PARTICULAR TIME TO START A SIP
SIPs actually make market timing irrelevant- Regularity and consistency is more important than timing -
FREQUENCY OF SIPS is typically monthly or quarterly - Monthly SIPs are more popular- SIP date needs to be predefined
WHAT not to do in SIPs (Illustration)
Delay or discontinue a SIP
Target of @12% p.a.*R 1 crore at Age 60
An Early Start is Good
Every Delay 5 Year Doubles Monthly
Investment needed
Start Age Monthly Investment R
25 years 1540
30 years 2833
35 years 5270
40 years 10009
45 years 19819
Only needed if you start at 25 years butif you start 5 years later and so on
R 1540 p.m. R 2833 p.m.
* For Illustration purposes only. These are assumed returns and actual returns may vary. Monthly investment at the beginning of the month.
Start your GOOD EMI today!