Investing

101
What do you do with your
money?

SAVE?
SPEND?
INVEST
?
 What's wrong with just
saving?

Inflation eats up your savings over

time
 What does inflation do to your
savings?

100,000

80,000
₹

50,000

35,000
₹

₹
Today

5 Years 15 Years
20 Years

Impact of 5% yearly inflation on Savings

What does inflation do to your
expenses?
Impact of Inflation

80,000
₹
60,000
₹
40,000
30,000

₹
₹

Today 5 Years 15 Years

20 Years

Impact of 5% yearly inflation on

expenses
 INVESTING - the safeguard against inflation

• Start Saving … earlier you start the better.

• Progress from a Saving to Investing.
• Put money to work rather than accumulating or
Solution? keeping it idle.
• You work hard to earn money … So, make the
money work hard for you.
• Benefit from the Power of Compounding.
 Your investments should

• Fight inflation for you.

• Provide income when you need it.
Make your • Be ACCESSIBLE and usable in parts and
investments portions.

work for you • Grow in value and appreciate over time.

• Be REALISABLE at fair value and low cost.

Proper Asset Allocation is the answer

What are the various
options?
Determine what are you investing for?
Goal based investing

with your specific financial goal in mind

 What is Asset Allocation ?

Asset Allocation is like a balanced thali …

  A mutual fund is the trust that pools the
savings of several investors who share a
common financial goal.
 Money collected is invested by a
What is a professional fund manager in different
types of securities.
Mutual Fund?  Securities could range from shares to
debenture, from Government Bond to
money market instruments, depending
upon the scheme’s stated objective.
How does a Mutual Fund
work?

• Pool of investors money.

• Invested according to pre-specified investment
objectives.
• Benefits accrue to those that contribute to this
pool.
• There is thus mutuality in the contribution and
the benefit.
• Hence the name 'mutual’ fund.
Why invest in mutual
funds ?
 Classification of Mutual Funds

Based on Based on Investment Based on

Portfolio Investment
Structure
Style

Open
Debt Funds Passive
Ended
Funds
Funds
Closed
Equity Active Funds
Ended
Funds
Funds

Interval Funds Hybrid Funds

 Classification - Based on Structure

•
Open Ended •
No fixed maturity date.
Accept continuous sale and re-purchase requests.
Funds •
•
Shares are priced daily EOD based on their current NAV.
Unit capital is not fixed.

• Run for a specific period.

Closed • Offered in an NFO but are closed for further purchases

Ended Funds after NFO, afterward traded on exchange.

• Unit capital is kept constant.

Interval • Variant of closed-ended funds.

• Becomes open-ended at specific pre-determined
Funds intervals.
• Must be mandatorily listed.
 Classification - Based on Investment Style

Passive
• Replicate a market index or specific market segment.
• Invest in same securities and in same proportion as that of
index.

Funds
• No active selection of any stock / sector.
• Expenses are lower.
• Portfolio is modified every time index composition changes.

Active
• Invests in securities and sectors that may offer a better
return than the index.
• Actively manage the allocation to market securities and

Funds
cash.
• May perform better or worse than the market index.
• Incur a higher cost than passive funds.
Classification - Based on Investment Objective

Debt • Invest in fixed income instruments like govt

Funds bonds, corporate debt securities etc.

• Aim to provide regular income.

Equity • Invest in equity securities.

• Aim to provide growth and capital appreciation over long
Funds term.

Hybrid • Invest in a combination of equity and debt securities.

• Proportion of equity and debt may vary.

Funds
• Aim to provide for both income and
appreciation.
capital
 Equity Funds
Categories
Multi Cap Fund • At least 65% investment in equity &
equity related instruments

Large Cap Fund • At least 80% investment in large cap

stocks

Large & Mid Cap Fund • At least 35% investment in large cap
stocks and 35% in mid cap stocks

Mid Cap Fund • At least 65% investment in mid cap

stocks
Small cap Fund • At least 65% investment in small cap
stocks
 Investment Modes

Direct Mutual Fund Regular Mutual Fund

• Bought through an intermediary.
• Directly offered by fund house.
• No involvement of third party agents • Intermediaries can be brokers,
– brokers or distributors. advisors or distributors.
• No commissions and • Commissions and brokerage
brokerage. paid.
• Have low Expense ratio (because • High Expense ratio as there
of no commissions). are commissions to pay.
• Have high NAV. • Low NAV.
• Return is higher due to a lower • Return is lower due to a higher
expense ratio expense ratio
 Mutual Fund Plans – Growth vs Dividend Options

• Gains made in portfolio are retained and reflected in NAV.

Growth • Realized profit/loss is treated as capital gains or loss.
Option • No increase or decrease in number of units, except if units
are purchased or sold, by the investor.

• Fund declares dividend from realized profits.

Dividen • Amount and frequency varies and depends upon
d distributable
Payout surplus.
Option • NAV falls after dividend payout to the extent of dividend paid.

• Dividend is re-invested in same scheme by buying additional

Dividend units at ex-dividend NAV.
Reinvestmen • Number of units standing to the credit of the
t Option increases
investor, each time a dividend is declared, and reinvested
back into the scheme.
 Investment Modes in Mutual Funds

Lump-sum • One time investment.

• Usually, large sum of money is invested in one go.
Investment • Investor faces risk of volatility in markets.

Systematic •
•
Staggered Investment.
Period of commitment - 6 months, 1 / 3 / 5 years.
Investment •
•
Specific intervals - monthly, quarterly, half-yearly.
Made on specific dates e.g. 1st, 5th, 10th, 15th of
Plan (SIP) every month.
 Systematic Investment Plan (SIP)

• SIP is a method of investing a fixed sum, at a regular interval, in a

mutual fund scheme.
• Similar to monthly saving schemes like a recurring deposit.

• Advantages
1. Enables regular investments without any additional paperwork
2. Convenient way to invest regularly through one-time standing
instruction
3. Convenience of small installments
4. Rupee Cost Averaging Benefit to counter volatility - it brings
down the average cost of your Investments
5. No timing the market!
 SIP: The Power Of Compounding

SIP of Rs. 1,000 invested per month @ 8% pa till the age

of 60.
Age Total Value
Amount at the age of 60
Saved
25 4,20,000 23,09,175

30 3,60,000 15,00,295

35 3,00,000 9,57,367

40 2,40,000 5,92,947

…the sooner you start, makes a lot of

difference!
SIP - How Rupee Cost Averaging
helps
 Systematic Withdrawal Plan (SWP)

• SWP is a facility which allows an investor to withdraw a fixed

amount from the investment in a MF scheme at pre-determined
interval, such as monthly or quarterly basis.

• Under SWP, units equivalent to the amount desired by the

investor are redeemed and the proceeds are credited to the bank
account of the investor on a pre-determined date.

• SWP can be used a source of regular cash flow especially for

post-retirement planning.

• SWP also helps in supplementing your regular salary, etc.

income by way of additional cash flow

• Tax Benefit - Instead of selling all the units at once,

spanning the income across multiple intervals can
lower the total tax. It is a tax efficient way of
receiving regular income.
 Systematic Transfer Plan (STP)

• STP is a plan that allows investors to give consent to a mutual fund to

periodically transfer a certain amount / switch (redeem) certain units
from one scheme and invest in another scheme of the same mutual
fund house.

• Through STP, you can transfer your money to a target equity fund
while you are invested in a debt or liquid fund. Therefore, you will get
the returns of the equity fund you are transferring into and at the same
time remain protected as a part of your investment remains in debt..

• STP facilitates in rebalancing the portfolio by allotting investments

from debt to equity or vice versa. If your investment in debt increases
money can be reallocated to equity funds through an STP and if your
investment in equity goes up money can be switched from an equity
to a debt fund.
THANK YOU!