4 simple solutions to meet your investment requirements
TRANSCRIPT
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4 Simple Solutions to meet your investment requirements
Confidential: Not for Public Circulation
India Savings skewed towards traditional options
Equity Constitutes approximately 3% of the Financial Savings of
Household Sector in India .
Source: latest RBI Annual Report dated March 2014
Equity includes Shares and Debentures. Government Securities are all claims on Government
Distribution of Financial Savings of Household Sector in FY 2014
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Understanding your requirements !!
What do investors typically want ???
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A Small Differential Can Work Wonders
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Different investment options give different rate of returns depending
upon the risk return characteristics
Thus, a small difference in rate of return results in a huge difference in the
resultant earnings
No of Yrs Rs. 10000 Invested Per Month
6% p.a 8% p.a 10% p.a 12%p.a
5 701,188 739,667 780,823 824,863
10 1,646,986 1,841,656 2,065,520 2,323,390
15 2,922,728 3,483,451 4,179,242 5,045,760
20 4,643,511 5,929,472 7,656,969 9,991,479
30 10,095,376 15,002,951 22,793,253 35,299,137
2 % rate differential leads to extra earnings of
30 49.07 Lakhs 77.90 Lakhs 1.25 Crs
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Presenting 4 Simple Solutions to
meet your Investment Needs
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4 ‘SIMPLE’ but ‘SMART’ Investment Solutions
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Stable Returns + Low Volatility
Time Horizon 3 years
Fixed Deposits
Accrual Funds
Tax Savings + Wealth Creation
Time Horizon 3 years
PPF
Tax Saver Funds
Retirement Solution
Goal Oriented
Insurance
Retirement Funds
1 2 4
Tax Efficient, Simple but Smart Solutions to meet all your
investment needs
Long Term Growth +
Regular Income
Time Horizon 5 years
PO - MIS
Balanced + SWP
3
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Accrual Funds
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Ideal for investors looking for a SUPERIOR ALTERNATIVE TO
TRADITIONAL FIXED INCOME INVESTMENTS
Superior & Consistent Returns (versus traditional offerings)
Tax Efficiency (> 3 years - Indexation Benefit)
No restriction on liquidity & investment limit
Well diversified portfolio with
<= 10% limit per issuer
<= 25% limit per sector
<= 20% in group exposure
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Accrual Funds – Typical characteristics
All Weather Funds – Suitable Across Market Cycles
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Positioning:
High yielding funds focusing on consistent
returns
Duration Discipline:
Low duration is maintained at <= 2 yrs
Balanced Rating Profile :
Balanced exposure in well researched credit
papers
Diversified & Liquid Portfolio :
Well diversified across 50 – 60 issuers
Exposure across maturities
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Tax Efficient Returns better than FDs
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Average Differential In Post Tax
Returns over the years has been
2.87%, which is ~10% Absolute
over 3 years
Note: For accrual funds, returns are of regular plan. For BANK FD, rates are of 3 yr fixed deposits offered by SBI. Source : SBI
Website. Tax benefits are subject to the existing tax laws. Debt oriented Mutual Fund Schemes enjoy indexation benefit of 20.6% if
units are sold after 3 years.CII (inflation Index) has been assumed at 7%. In case of fixed deposit, tax rates are according to the
applicable tax brackets. For the purpose of calculation, highest tax bracket of 33.9% has been considered.
Average Difference
0.58%
Average Difference
2.87%
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Tax Efficient Returns better than Bank FDs
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Additional Return of ~Rs. 1 Lakh on an Investment of Rs. 10 Lakhs over 3 Years
Note: For accrual funds, returns are of regular plan. For the purpose of calculation, 3 year average returns/FD rates on monthly basis
over a calendar year has been considered. Tax benefits are subject to the existing tax laws. Debt oriented Mutual Fund Schemes
enjoy indexation benefit of 20.6% if units are sold after 3 years.CII (inflation Index) has been assumed at 7%. In case of fixed deposit,
tax rates are according to the applicable tax brackets. For the purpose of calculation, highest tax bracket of 33.9% has been
considered.
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Tax Saver Funds
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Ideal for investors looking for Long Term Wealth Creation
along with Tax Benefit
Lowest Lock - in of 3 Years
Higher Return Potential - Through Equity Exposure
Long Term Capital Gain Tax Free
Tax Savings upto Rs 46,350 every year (U/s 80 C)
Offers Regular Cash Flow through Tax Free Dividends
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Create Wealth while Saving Tax with Tax Saver Funds!!
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• Long term wealth creation through power of equities
• Cash flows through regular dividends (13 dividends in last 12 quarters)
• Free Life Insurance upto Rs 21 lakhs (120 times cover of monthly SIP after 3rd year)
Avg. Rolling Returns (Excluding Tax Benefits) (%)
Period Fund Benchmark Outperformance
3 years 13.4 8.4 5.0
5 years 14.0 9.3 4.7
7 years 14.9 10.1 4.7
10 years 15.8 11.4 4.4
Value of Rs. 1.5 Lakh invested (in Rs. Lakh)
Period Fund Benchmark Outperformance
3 years 2.19 1.91 28,000
5 years 2.89 2.34 55,000
7 years 3.96 2.95 1.01 Lakh
10 years 6.52 4.42 2.09 Lakh
3 year Avg. Rolling Returns including Tax Savings is 20.9%
Annualized Returns excluding Tax Benefits
Source: MFI Explorer
One of the leading Tax Saver Funds has been considered for calculating Returns
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Balanced Funds + SWP
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Ideal for investors looking for TAX EFFICIENT REGULAR MONTHLY
CASH FLOW along with WEALTH CREATION
Higher Return Potential - Through Equity Exposure
Lower Volatility through Debt exposure
Tax Efficiency - Long Term Capital Gain Tax Free
Regular Cash Flows (Tax Free Dividends + SWPs)
Ideal Investment Horizon ~ 5 Yrs
Triple Benefits: Wealth Creation + Tax Efficiency+ Cash Flows
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Monthly SWP in Balanced Funds
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A tax efficient way to plan regular cash flow & earn higher returns
The below table represents back tested results for investments made in one of the leading Balanced Funds in June
of every year since inception and a monthly SWP of 9% for a period of 3, 5 & 7 years
Average Rolling Returns of > 14% over 3 years, 5 years and 7 years
Year of Investment 3 years 5 years 7 years
2005 7.4 14.7 12.0
2006 13.1 14.8 12.3
2007 20.1 13.9 15.8
2008 17.8 12.9 16.3
2009 12.4 15.6
2010 6.1 13.1
2011 13.9
2012 21.8
Average Rolling Returns 14.1 14.2 14.1
Minimum Returns 6.1 12.9 12.0
Maximum Returns 21.8 15.6 16.3
% Returns with 9% SWP across different time periods
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Monthly SWP in Balanced Fund
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A tax efficient way to plan regular cash flow & earn higher returns
If any investor had invested Rs 10 lakh and done a SWP @9% for a period of 5 years, across
various time periods, the value of Investments and withdrawals would be as under:
13
.5 L
13
.6 L
12
.9 L
12
.3 L
12
.4 L
12
.4 L
4.5
L
4.5
L
4.5
L
4.5
L 4.5
L
4.5
L
Jul'05 Jul'06 Jul'07 Jul'08 Jul'09 Jul'10
VALUE OF INVESTMENT TOTAL AMOUNT WITHDRAWN
Current Value of
Investment
Withdrawal
through SWP
Intitial Investment : Rs. 10 lakhs
Withdrawal: Rs. 4.5 lakhs
Average Current Value of Investment: Rs. 13.2 Lakhs
Average Total Value of Investment: Rs. 17.7 Lakhs
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We all need retirement planning because…..
Higher Life Expectancy -
thanks to science and medical
advancement
Nuclear Family Disintegration of Joint family system
Lack of Social Security Measures Do not have any government sponsored social security
Inflation is a Silent Killer A monthly expense of Rs 1 lakh today could be Rs 7 lakh in 30 years*
* Assuming inflation rate @ 7%
Why Plan for Retirement ??
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Retirement Funds
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Ideal for investors looking One Stop Retirement Solution Offering Long
Term Wealth Creation + Regular Income in Tax Efficient Manner
Wealth Creation: Take advantage of equity and debt oriented scheme
with an aim create long term wealth for post retirement
Liquidity - Withdrawal option after a small lock-in period, subject to the
applicable exit load
Flexibility - to choose investment allocations between Equity / Debt to
construct your portfolio
Convenience- do unlimited switches between equity-debt /Step-up your
investments/Auto-withdrawal with SWP facility on retirement
Tax deductions for investments up to Rs. 1.5 Lakhs u/s 80C
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Note: The above table is only for illustration purposes, purely to explain the concept of SIP and annuity and should not be taken as any indication of correlation with the scheme either by way of capital protection or equity market returns.
Retirement Calculator - Accumulation & Distribution
Returns during
Accumulation
Returns during
Distribution
Returns during
Accumulation
Returns during
Distribution
12% 10% 15% 12%
Retirement
Corpus
Monthly Pension
Amount
Retirement
Corpus
Monthly Pension
Amount
20 40 480 4,800,000 117,647,725 980,398 310,160,548 3,101,605
30 30 360 3,600,000 34,949,641 291,247 69,232,796 692,328
35 25 300 3,000,000 18,788,466 156,571 32,435,296 324,353
40 20 240 2,400,000 9,892,554 82,438 14,972,395 149,724
45 15 180 1,800,000 4,995,802 41,632 6,685,068 66,851
50 10 120 1,200,000 2,300,387 19,170 2,752,171 27,522
58 2 24 240,000 269,735 2,248 277,881 2,779
SIP Start
AgePeriod (Yrs)
No. of
Installments
Amount
Deposited
10,000
60 Years
Assumptions
Monthly Instalment Rs. * The returns earned on the retirement corpus is assumed to be systematically withdrawan as
annuity. Hence, the principal of the retirement corpus will remain intact and the annuity will
be perpetual in natureRetirement Age
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To Sum Up
4 Simple and Smart investment solutions to meet your
investor needs:
Accrual Funds – Superior alternative to traditional investment options
Balanced + SWP – Long Term Wealth creation & Regular Income
Tax Saver Funds – Create Wealth while Saving Tax (u/s Sec 80c)
Retirement Funds – Retirement Solution offering Wealth Creation
opportunity + Tax Benefits
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Thank You
Contact your Financial Advisor for more details