Perspectives on Investing

WHAT REALLY MATTERS 1

3

Some questions we will try to address today

returns?

I always seem to buy when themarket has peaked, is there a better

way?

What, when,how do I buy

financialproducts?

What are thefactors thatdetermine

Are market levelsrelevant??

What is better:buy and hold or

trade?

Are you Saving or are you Investing?

PROFESSION INVESTMENTS

INCOME

CREATION/ACCUMULATION

OF WEALTH

NURTURE/PRESERVATION

OF WEALTH

Profession vs. Investments

5

PROFESSION INVESTMENTS

INCOME

YOU KNOWBEST

TRUST YOURADVISOR TOKNOW BEST

Profession vs. Investments

6

Consider the rising cost of living!

7

8

Wedding at the Taj

Guests :

Price per plate:

Decoration:

Other Expenses / Gifts, etc:

500

Rs. 2,000

Rs. 10,00,000

Rs. 15,00,000

Planning a wedding today

Total Expenses Rs. 35,00,000

RISING COST OF LIVING

9

Wedding at the Taj

Guests :

Price per plate:

Decoration:

Other Expenses / Gifts, etc:

500

Rs. 6,414

Rs. 32,07,135

Rs. 48,10,703

Planning a wedding for your child in 20 years

Total Expenses Rs. 1,12,24,838

Assuming Inflation @ 6% for 20 years

RISING COST OF LIVING

Household expenses are on the rise

1 Liter Carton Milk

Amount

Rs. 25

Rs. 40

Rs. 72

Rs. 128

Year

2000

2010

2020*

2030*

A Loaf of Bread

Amount

Rs. 10

Rs. 16

Rs. 29

Rs. 51

Year

2000

2010

2020*

2030*

1 Kg Apples

Amount

Rs. 25

Rs. 80

Rs. 143

Rs. 257

Year

2000

2010

2020*

2030*

Inflation will further shrink your buying power!

Assuming Inflation @ 6% for years 2020 and 2030

RISING COST OF LIVING 10

11

Yesterday’s luxuries are becoming today’s necessities

Products previously thought as luxuries are the norm today

RISING COST OF LIVING

Items 1991 TodayCable T. V. No YesLCD T. V. No YesMobile No YesWashing Machine No YesMicrowave No YesCar No YesHome Theatre System

No Yes

Income

Our life cycle: Focused on meeting current needs only

Birth and

Education0 25 60Working Life 75 +Retired Life

Child 1’sCollege

Child 1Car

Marriage

College

Age

Child 2

Can we ignore planning for the future?

RetirementChild 2’sMarriage

Child 1’sMarriage

House

Child 2’s

RISING COST OF LIVING 12

Failing to plan today is as good asplanning to fail in the future!

13

14

What typically drives us to invest?

Greed / Fear?

News, hot tips, gut feeling?

Macro-economic or global scenario?

Political environment?

Should thesebe the mainmotivators to

invest?

5% of the return– Relative performance of selected funds

95% of the return– Asset Allocation– Ability to handle emotional & financial stress– Monitoring and tracking your portfolio periodically

Creating long term wealth: What really matters?

15

Importance of Asset Allocation

16

Asset Allocation

Diversifies your investments across asset classes like equities /stocks, bonds / debt, cash, real estate, etc

A common sense investment strategy

Tailored to your needs and goals

RISK PROFILE FINANCIALGOALS

ASSETALLOCATION

ASSET ALLOCATION 17

Benefits of Asset Allocation

May reduce overall risk

May improve your chances to earn more consistent returns over time

Helps keep you focused on your goals

ASSET ALLOCATION 18

19

Risk: Low to Medium

Period: Less than 1 year

Money Market Funds

Short-term deposits / Government Paper

Period: 1 to 3 years

Income/Bond Funds

Company Fixed Deposits

Capital Preservation

Asset Allocation: Need based strategy

Capital Growth

Risk: Medium to HighPeriod: 3 to 5 years

Income

Risk: Medium to Low

Stocks

GrowthFunds

BondsDebentures

ASSET ALLOCATION

21

Asset Allocation: Age based strategy

ASSET ALLOCATION

15.00%

Age Group 25-40

10.00%

Growth (Equity)

Income (Bonds)

Liquidity (Banks)

Growth (Equity)

Income (Bonds)

35.00%

15.00%

Age Group 41-50

75.00%

Age Group 51-60

Income (Bonds)

Growth (Equity)

Liquidity (Banks)

45.00%

20.00%

35.00%

Income (Bonds)

Growth (Equity)

Liquidity (Banks)

Liquidity (Banks)

50.00%

Age Group Above 60 yrs

50.00%

25.00%

25.00%

The above are only hypothetical examples and are not necessarily indicative of the strategies to follow for the age groupsmentioned above

EXAMPLE Equity Funds Income Funds

Profile & objective based allocation 70% 30%

Bull Market fluctuation 80% 20%

Rebalance 70% 30%

Making asset allocation work

Periodic Rebalancing

Rebalancing helps investors enter equities at ‘lows’ and exit at‘highs’ without having to ‘time’ the market

ASSET ALLOCATION

EXAMPLE Equity Funds

Income Funds

Profile & objective based allocation 70% 30%

Bull Market fluctuation 80% 20%

Rebalance 70% 30%

21

22

Making asset allocation work

Periodic Review

Periodic review of objectives can ensure an investor is not left at thevagaries of equity markets when he needs his money

ASSET ALLOCATION

EXAMPLE Years to goal Equity Allocation %Today 10 70%After 5 yrs 5 60%After 7 yrs 3 40%After 9 yrs 1 10%

Creating long-term wealth:What really matters?

23

Where you invest

WHAT REALLY MATTERS

Equities can outperform other asset classes over time

Average inflation figures for the past 5, 10 & 15 years were 5.29%, 5.03% & 4.98% respectively

As of 31 March, 2011. *Compounded Annualized Growth Rate (CAGR), Gold Data: International Spot Gold Prices;# Average of 10yr GOI yield to maturity, N.A.: Not Available. FD rate shown above is rate effective from 14.02.2011 fordeposits below Rs. 1 crore as offered by State Bank of India (Source: www.sbi.co.in). Bank Fixed Deposits arerelatively safer as they are covered under Deposit Insurance and Credit Guarantee Corporation of India to the extent ofRs. 1 lakh per account. GOI bond offers fixed and assured returns.Source: BSE, Newswire18. Past performance may or may not be sustained in future.

24

When you invest

Consider the case of Franklin India Bluechip Fund (FIBCF)

Over the 17 period December 01 1993 – March 31 2011, spanning 4186 businessdays, Franklin India Bluechip Fund grew at an annualized rate of 25.67% p.a.

If in the process of timing, an investor had been out of the market on the 10 bestdays, his returns would be 4.89%.

Staying out on the 30 best days, his returns would be 1.86%.

Past performance may or may not be sustained in future. Returns of FIBCF andbenchmark (BSE Sensex): 1 yr, 3 yr, 5 yr , since inception: FIBCF: 12.77%, 14.20%,14.38%, 25.67%; BSE Sensex: 10.94%, 7.52%, 11.50%, 10.79%. Returns arecompounded and annualized based on 31 Mar 2011 Growth Plan NAV of Rs.219.1105. Inception Date: 01 Dec 1993. The scheme became open-ended in Jan1997. Dividends are assumed to be reinvested and bonus has been adjusted. Load isnot taken into consideration.

25

26

When you invest

Stayed fully invested, your returns would be:

Missed the 10 best days, your returns would be:

Missed the 20 best days, your returns would be:

Missed the 30 best days, your returns would be:

Missed the 40 best days, your returns would be:

15.10%

9.23%

5.68%

2.75%

0.02%

Take another example, the BSE Sensex

For the 20 year period ended March 31 2011 if you had:

WHAT REALLY MATTERS

The example given above is purely hypothetical and illustrative only since onecannot invest directly in the BSE Sensex. Past performance may or may not besustained in future.

27

When you invest

Points to ponder

Perfect market timing requires one to get two things right: the right exitpoint and the right re-entry point

Getting even one of these wrong can affect one’s returns

Mathematically, the odds are heavily against one being able toperfectly time the market

The probability of getting the timing right is 0.23%*

So what’s a better way to invest?

WHAT REALLY MATTERS

* 10 best days from 4186 as shown in the example of FIBFC

28

Not market timing but time in the market matters!

Consider the example of Franklin India Bluechip Fund, a fundwith a 17 year track record across market cycles

Assumed Rs. 10000 invested at Inception in FIBCF and BSE Sensex. Past performance may ormay not be sustained in future. Dividends are assumed to be reinvested and Bonus is adjusted.Load is not taken into consideration. Period: Since Inception (01 Dec 1993) to 31 March 2011

WHAT REALLY MATTERS

MaximumReturns

MinimumReturns

AverageReturns

Possibility ofMaking Money

Possibility ofLosing Money

1 Year 199.42% -50.60% 31.86% 75.72% 24.28%

3 Year 79.75% -9.57% 26.89% 88.63% 11.37%

5 Year 56.08% 9.66% 28.81% 100.00% 0.00%

10 Year 40.19% 19.47% 28.42% 100.00% 0.00%

Staying invested helps!

While equities may be volatile in the short-term, over thelong term, the probability of loss decreases. Consider theexample of FIBCF

Past performance may or may not be sustained in future. Annualized Compounded returns based onGrowth Plan NAVs. Period - Inception date to 31 March 2011; BSE Sensex rolling returns for the sameperiod: Maximum returns, Minimum returns, Average returns, Possibility of making money, Possibility oflosing money: 1 Year: 110.38%, -56.26%, 14.93%, 62.24%, 37.76%; 3 Year: 62.30%, -18.52%, 11.98%,71.90%, 28.10%; 5 Year: 47.22%, -7.81%, 12.91%, 80.67%, 19.33%; 10 Year: 19.85%, 0.92%, 11.80%,100.00%, 0.00%. Sales load has not been taken into consideration. Dividend/Bonus are adjusted. InceptionDate: 01 December 1993.

Over a 5 year horizon, investors have made money!

MaximumReturns

MinimumReturns

AverageReturns

Possibility ofMaking Money

Possibility ofLosing Money

1 Year 199.42% -50.60% 31.86% 75.72% 24.28%

3 Year 79.75% -9.57% 26.89% 88.63% 11.37%

5 Year 56.08% 9.66% 28.81% 100.00% 0.00%

10 Year 40.19% 19.47% 28.42% 100.00% 0.00%

29

investment decisions…"EXUBERANCE

RELIEF

"Should I have exited when Iwas making money"

"Once I recover my principalI'll exit"

RELIEF

"I've finally recovered myprincipal. But should I exit

now?"

EXCITEMENT

"I can withstand this, thingsshould turn around…"

ANXIETY

FEAR

"Markets are on a roll…"

"Should be a temporarycorrection"

Cycle of market emotions should not rule you…

“Has been one of my best

How you invest

"Will the market ever go up?""How long will this correction

last?"HOPE

PANIC

There is often no relationship between performance of a fundand an investor’s performance

WHAT REALLY MATTERS 30

Rs. 76.56 lacs Rs. 2.27 Crores

When you start

WHAT REALLY MATTERS

So what do you think is their

Starting early can make a difference to your wealth

Gita, Age 30

Sita, Age 40

retirement corpus at age 60assuming a return of 10%

annually on their investments?

10,000 p.m

10,000 p.m

31

What are the returns you earn

WHAT REALLY MATTERS

Value at age 60 of Rs. 100,000 invested every year at age 30 upto 58at different rates of returns

The returns you earn over time can make a difference

Rs.4.97 Crores

Rs. 2.67 Crores

Rs. 1.20 Crores

8% 12% 15%

32

33

What is a Systematic Investment Plan (SIP)?

The term “systematic investing” applies to the process of investingregularly i.e. at fixed intervals, say monthly or quarterly

Why invest systematically?

– Most of us get a monthly remuneration or salary

– Most of us pay monthly EMIs on a car, house, etc

– Isn’t it obvious we should also invest monthly?

SYSTEMATIC INVESTMENT PLAN

Two basic principles on which SIP works

Power of Compounding

Rupee Cost Averaging

SYSTEMATIC INVESTMENT PLAN 34

35

Rupee Cost Averaging at work

SYSTEMATIC INVESTMENT PLAN

1-Jan-10 1-Feb-10 1-Apr-10

NAV = 10.0Units = 100

1-Mar-10 1-May-10

NAV = 10.0Units = 100

NAV = 12.00Units = 83.3

NAV = 8.0Units = 125

Average Price per unit: Rs. 10.00

Average Cost per unit : Rs. 9.79

Assume Rs. 1,000 invested per month

Rs. 1,00,000 per Month over FIBCF BSE Sensex

Rs. CAGR Rs. CAGR

1 year (Rs. 12,00,000) 12,65,300 10.30% 12,61,000 9.61%

3 years (Rs. 36,00,000) 51,82,800 25.22% 47,93,400 19.56%

5 years (Rs. 60,00,000) 91,52,800 16.94% 81,57,500 12.26%

7 years (Rs. 84,00,000) 1,74,01,600 20.46% 1,52,06,000 16.67%

10 years (Rs. 1,20,00,000) 5,06,37,900 27.14% 3,51,13,300 20.37%

Since Jan 97* (Rs. 1,71,00,000) 15,84,36,200 27.83% 6,09,01,600 16.32%

How SIP has worked

SYSTEMATIC INVESTMENT PLAN

If you had invested Rs. 1,00,000 every month through an SIPin FIBCF, it would have grown to:

Past performance may or may not be sustained in future. Annualized and compounded returns based on 31March 2011 Growth Plan NAV of 219.1105. Load is not taken into consideration. Dividends assumed to bereinvested and Bonus adjusted. *The scheme became open end in January 1997. Monthly investment ofequal amounts invested on the 1st day of every month has been considered. Inception Date: 01 December1993.

Rs. 1,00,000 per Month over FIBCF BSE SensexRs. 1,00,000 per Month over

Rs. CAGR Rs. CAGR

1 year (Rs. 12,00,000) 12,65,300 10.30% 12,61,000 9.61%

3 years (Rs. 36,00,000) 51,82,800 25.22% 47,93,400 19.56%

5 years (Rs. 60,00,000) 91,52,800 16.94% 81,57,500 12.26%

7 years (Rs. 84,00,000) 1,74,01,600 20.46% 1,52,06,000 16.67%

10 years (Rs. 1,20,00,000) 5,06,37,900 27.14% 3,51,13,300 20.37%

Since Jan 97* (Rs. 1,71,00,000) 15,84,36,200 27.83% 6,09,01,600 16.32%

36

To put it in perspective

Where you invest: Equities can outperform other asset classes overtime

When you invest: Time in the market and not market timing matters!

How you invest: Avoid market emotions and market noise

When you start: Starting early can help in the long-run

What are the returns you earn: A small difference over the long termcan make the difference to your overall corpus

37

A word on risk…

43

44

We all view risks in our own way

There is a risk to investing

There is a risk to not investing, as well

There is a risk to investing in equitiesThere is a risk to not investing in equities, as well

There is no such thing as a ‘risk-free’ investmentIt is important that you are comfortable with the risksassociated with whatever investment avenue you choose

Here’s wishing you all success in investing!

Thank You

53