Systematic Investment Plans
&
Your Financial Goals
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Areas covered
✓ Understanding Risk
✓ SIP & its benefits
✓ SIP vs recurring deposits
✓ SIP & Home loan
✓ SIP vs Topup SIP
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Sensex rolling return 1 years
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Sensex rolling return 5 years
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Long term = less risk
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SIP - definition
Investing fixed amount every month in
Mutual Fund
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SIP - features
You can
choose ANY
DATE for
your SIP
No restriction You can
of amount. REDEEM
Choose ANY your SIP
AMOUNT anytime
You can stop
your SIP & let You can
your STOP your
Investment SIP anytime
growth
You can
Increase
Decrease
your SIP amt
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When to buy and when to sell!
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No need to time the market
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Rupee cost averaging
Time Amount NAV (Per Unit Units
(Month) Invested Rs) Purchased
1 1,000 23 43.48 Average NAV Per Unit over 12 months =
2 1,000 21 47.62 (23+21+22+19+16+17+17+20+21+19+25+24)/12
3 1,000 22 45.45
4 1,000 19 52.63
Rs 20.33
5 1,000 16 62.50
6 1,000 17 58.82
7 1,000 17 58.82
8 1,000 20 50.00
9 1,000 21 47.62 Average Cost per unit over 12 months =
10 1,000 19 52.63 12000/601 =
11 1,000 25 40.00 Rs 19.96
12 1,000 24 41.67
Total 12,000 601
Source: Internal, hypothetical numbers for illustration purpose only
Average Cost Per Unit Will always be lesser than the Average NAV per Unit,
regardless of the market movements.
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Benefits of SIP
✓ It brings financial discipline in life
✓ Timing risk is eliminated
✓ Works well over long period
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Benefits of SIP
✓ Enjoy the power of compounding
✓ No need to wait to accumulate big sums
✓ Reach financial goals in a painless manner
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Discipline is the key
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8th Wonder of world
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Power of Compounding
Future value of an SIP
30000000 281.58 Lac
@15%
25000000
Value of SIP of Rs 5000 @15%
20000000
15000000
10000000 70.88 Lac
@8%
5000000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Year RD value SIP Value
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Invest for longer time horizon
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Start as early as possible
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Cost of Delay
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Patience is the key
You take a tiny seed, plant it and water it...you get a tiny
1 sampling.... nothing more
You water it, fertilize it.... the sampling stays as it is....
2 nothing happens
You continue to water it, take care of it...still nothing
YEARS 3 happens
Against your better judgment, you need to continue to
4 water it, fertilise it... and still nothing will happen
To everyone's surprise, the tree sprouts and grows NINTY
5 feet in SIX weeks
What was going on in first Few Years?
✓The tiny sampling was actually developing its root system underground to
sustain its impending over the ground growth fifth year onwards.
Chinese Bamboo tree ✓If you had uprooted the sampling to see why it was not growing, it would die.
tests your patience ✓But if you were patient and had faith, you would witness the miraculous growth
later on
SIP – SIMILAR GAME OF PATIENTS
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SIP stopped due to short term panic
43 LC funds 3 Years
Investment 360000
Value 348896
CAGR -2.02% Should I stop my SIPs?
*Average Return of all Large cap funds of Rs 10000 of SIP started on 1st September 2010.
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SIP continued
43 LC funds 3 Years 4 Years
Investment 360000 480000
Value 348896 699858
CAGR -2.02% 19.10%
*Average Return of all Large cap funds of Rs 10000 of SIP started on 1st September 2010.
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Staying invested is the key
43 LC funds 3 Years 4 Years Till Feb 2018
Investment 360000 480000 900000
Value 348896 699858 1541167
CAGR -2.02% 19.10% 14.03%
*Average Return of all Large cap funds of Rs 10000 of SIP started on 1st September 2010.
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Long term track record
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Recurring deposits
Recurring Deposit
is one of the most
favourite instrument
of saving among
Indians.
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SIP vs recurring deposits
Choose Wisely
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Home loan
Would you like to get back all EMS paid for
Home Loan?
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SIP & home loan EMI
➢ Start an SIP along with
home loan
➢ Home loan tenure is
normally longer in
nature.
➢ By Starting a small SIP
you can recover entire
amount you paid to
bank.
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Case study – EMI calculation
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Future value of an SIP
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SIP & your financial goals
We All Need To Save For
❖ Retirement ❖Buying a House
❖ Child’s Education ❖ Buying a Car
❖ Child’s Marriage ❖ Saving for Vacation
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Retirement planning
Name Raj Sharma - Age 30
• Retirement age 55Years
• Life expectancy 75 Years
• Current monthly expense 25000
• Inflation 6%
• Post retirement risk free rate of return 8%
• Monthly Expense at retirement 1,07,297
• Corpus Required for the Retirement 2,16,86,910
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Monthly savings required for retirement
Years to Save – 25 Retirement Corpus needed 3.76 Cr.
Expected Return 8% 12% 15% 18% 20%
Monthly
Investment 29,386 14,355 8,519 5,095 3,627
required
Power of compounding is the 8th wonder of world.
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Higher education for your kids
Parent: Anil Kumar / Child Name: Samir
• Child age 5 Years
• Higher education age 18 Years
• Current education expense 10,00,000 Rs.
• Inflation 8%
• Expected education cost(after 13 years) 27,19,623 Rs.
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Monthly saving required
Years to Save – 20 Child Education Fund Required 27.29 Lacs
Expected Return 8% 12% 15% 18% 20%
Monthly Investment
10,111 7,600 6,111 4,902 4,228
required (Rs)
Power of compounding is the 8th wonder of world.
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Marriage funding for your kids
Parent : Anil Kumar / Child Name : Samir
• Child Age 5 Years
• Marriage Age 25 Years
• Current Marriage expense 20,00,000
• Inflation 8%
• Expected Marriage cost after 20 years 9,321,914
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Monthly Investment Required
Years to Save – 20 Child’s Marriage Fund Required 93.21 Lacs
Expected Return 8% 12% 15% 18% 20%
Monthly Investment
16,278 10,134 7,024 4,838 3,765
required (Rs)
Power of compounding is the 8th wonder of world.
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Goal based investing - SIP
Expected Return 8% 12% 15% 18% 20%
Higher Education 10,109 7,599 6,111 4,902 4,227
Retirement Planning 29,386 14,355 8,519 5,095 3,627
Marriage Funding 16278 10134 7024 4838 3765
Total SIP Required 55773 32088 21654 14835 11619
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Power of one degree more
At 99 Degree Celsius water is hot
At 100 degree Celsius water boils
and it can pull the engine
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Adding one more degree – Topup SIP
➢ With Top-Up SIP you can increase your SIP amount periodically in auto mode.
➢ TopUp can be done in % or Absolute term.
➢ SIP Amount will increase automatically
Example,
SIP Amount – Rs 5000/- TopUP Amount – Rs 500/- Frequency – Yearly
✓ 1st Year SIP Amount – Rs 5000/-
✓ 2nd Year SIP Amount – Rs 5500/-
✓ 3rd Year SIP Amount – Rs 6000/-
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Normal SIP vs topup SIP
SIP TopUPSIp
SIP Amount 10000 10000
Top UP Aount NA 1000
Return 15% 15%
Tenure 20 20
Future Value ₹ 61,63,656 ₹ 89,64,387
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Summary
✓ Set goals
✓ Invest for long term
✓ Start early
✓ Invest regularly
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Thank You
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