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  • Systematic Investment Plan (SIPs) (The Smart Investors Preference)

  • SIP(Systematic Investment Plan)

    The Formula for Creating Wealth

  • SIP(Systematic Investment Plan)

    Systematic Investment Plan (SIP) is a financial planning tool that helps you to create wealth, by investing small sums of money every month, over a period of time.

    A Systematic Investment Plan (SIP) is a vehicle offered by mutual funds to help investors invest regularly in a disciplined manner.

    SIP works on the principle of legitimate investments. It is like your recurring deposit where you put in a small amount every month.

    It allows you to invest in a MF by making smaller periodic investments (monthly or quarterly) in place of a heavy one-time investment.

    Systematic Investing in a Mutual Fund is to preventing the pitfalls of equity investment and still enjoying the high returns.


    It is best advised to start as early and follow these steps:

    Categorize the childs needs and then start saving up to meet each of these goals While calculating likely cost of education, factor in rate of inflation Start with a smaller sum

    Gain from the power of compounding

    Starting Early

  • www.ekarup.comAs there are many child specific goals you would have set, it is important to categorise them and prioritise them.

    You will be clear about your investment horizon whenever you invest.

    You will have a better picture on the amount of risk you will take towards completing a goal.

    You will be able to choose financial instruments that will help fulfil these individual goals.

    You will be able to stay away from high-risk instruments.

    Categorize, Prioritise and Invest

  • www.ekarup.comSIP - a good choiceSIP help you participate in the growth of capital markets and at the same time helps you diversify your risk. Thus it is a great option for securing your child's future.

    SIP gives you the flexibility to plan your investments depending on what the eventual need is that you are providing for.

    In a scenario,

    where the investment is for a goal that will require the funds in the next 2-3 years,

    Like a wedding or if your kid is in high school and will pursue professionals( Doctors, Engineers..) next - it is best to opt for a debt fund,

    Where your corpus is more or less protected and you are able to get some returns on your investment.

  • EducationEarning YearsPhase IPhase IIPhase IIIAge- 22 yrsAge- 60 yrsMarriageChild birthChilds EducationChilds MarriageHousing22 yrs38 yrs10- 20 yrsPost Retirement Years www.ekarup.comHuman Life Cycle


    1. Age of the child: Newborn to 5 years

    Investment horizon : 13 to 18 yearsDepending upon when you begin investing for your child,

    If you start investing at this stage, you allow your savings the maximum time to build up assets for your child's education.

    With time on your side, you can take higher risk and go for equity funds.

    However, if you choose to invest on a regular basis, try and increase the amount every year.Here are some model portfolios


    2. Age of the child: 6-12 years

    Investment horizon : 6 to 12 yearsWhile a part of the portfolio may still focus on aggressive investment options like equity funds,

    you will do well to include balanced funds also to reduce risk.

    The attempt should be to move money to lesser volatile investment options, as the child grows older.Cont


    3. Age of the child: 13- 18 years

    Investment horizon : 1 to 5 years

    At this stage, it would be advisable to invest in funds that are least volatile and overall the focus should be on preserving capital.

    Also, liquidity should be an important consideration while working out the strategy.

    While the open-ended mutual funds will ensure that the money is available to you as and when you require it, the key is to make the money grow at a reasonable rate.Cont

  • Most investors want to buy stocks when the prices are low and sell them when prices are high.

    But timing the market is time consuming risky.

    A more successful investment strategy is to adopt the method called Rupee Cost Averaging.

    Systematic investing can help put the power of compounding on your side.

    www.ekarup.comRupee Cost Averaging

  • www.ekarup.comMarket timing is irrelevant

  • Invest for Long Term

    Data Source : BloombergLower the riskGreater the effect of compoundingMore predictable average returnsHence longer your SIP

  • Assume

    You are 30 yrs of age ; have a wife and kidCurrent Annual expenditure of Rs. 5,00,000Retirement expected at age 60 yrs

    More Average prices (i.e. inflation) will rise by 7% paAfter 30 yrs when you retire, the low risk rate of return will be 6% pa (Considering you put all your accumulated corpus post retirement in a bank deposit)You will live for more 20 years post retirement You have invest from Rs.500

    So lets see what will be the corpus required at the time of your retirement to maintain the same current lifestyle additionally with enhanced medical expenses

    www.ekarup.comCase Study Real Life Situation

  • Current Expenditure Rs.5,00,000 p.a.

    Inflated at 7% p.a. for 30 years Expenditure at the time of Retirement 36,00,000 p.a. Income to be generated post Retirement Rs. 36,00,000 p.a.Corpus Required at the time of Retirement

    But then there is a solutionTherefore to generate this income every year post retirement you need to accumulate a corpuswww.ekarup.comYour first reaction Impossible! It cannot be achievedCont

  • So whats the SolutionJust one simple thingSubscribe for an SIP of Rs.15,000 per month in a good diversified equity fund for 30 years and forget itYou still dont believe it that it can be that simple; let us validate our conviction with actual returns generated in a equity fund over the yearsFrom the table it is crystal clear that if an investor did an SIP of Rs.15000 per month in Equity Fund for 15 years, he would have invested 27 Lakhs and that would have grown to a whopping number of 3.4 crore as on date; in spite of so many pitfalls in equity markets in last 15*conditions applyCont...For Example

    Equity FundSIP Investments15 year SIP10 year SIP5 year SIP3 year SIPTotal Amount Invested @ Rs.15000 per month ( Rs.)(Approx)2,700,000 *1,800,000 *900,000 *540,000 *Market Value as on July 29, 2011 (Rs.)(Approx)34,379,093 *8,682,024 *1,427,405 *798,522 * Returns (Annualized)*(%)(Approx)29.87% *29.64% *18.56% *27.29% * Benchmark Returns (Annualized)(%)#(Approx)15.87% *18.42% *8.36% * 14.08% *Market Value of SIP in Benchmark#(Approx)9,967,057 *4,737,423 *1,110,339 *664,982 *

  • www.ekarup.comTips to how to make safe investments

    Besides, since building up assets for your child's education is a long term objective,

    It is important to ensure that you invest in those options that have the potential to give you better real rate of return i.e. returns minus inflation. This factor is crucial considering the escalating costs of higher education.

    Mutual funds can provide an excellent investment vehicle for your child's education. Besides, investing through a tax efficient vehicle like mutual funds can help you accumulate more for your child's education.

  • www.ekarup.comRemember, the way you save as well your investment

    strategy will depend on many factors like,

    how much you wish to save,

    how long until the money is needed,

    And whether you have a lump sum or will be saving out of your current income.They offer.., diversification


    simplicity. Cont

  • www.ekarup.comDebt Oriented Child PlansIn addition to,equity oriented child plans, debt oriented child plans

    are also available in the market. These plans have a more conservative portfolio mix and are suitable for investors with moderate risk profiles and time horizons.

  • www.ekarup.comThe chart below shows annualized returns for equity oriented child plans over a one, three and five year time periods (based on Feb 20 NAVs).Cont

  • www.ekarup.comICICI Prudential Child Care Plan - Study Plan: This scheme was launched in 2001 and has Rs 36 Crores of AUM. The portfolio mix is weighted to debt, with equities comprising only 24%, debt 73% and cash equivalents 3%.

    The quality of the debt portfolio is good, comprising of G-Secs and highly rated corporate bonds

    Tata Young Citizens Fund:This is one of the oldest child plans, launched in 1995. It has nearly Rs 175 Crores of AUM.

    This fund has a slightly higher allocation to equities compared to its peers.

    Equity accounts for 49% of the portfolio mix, while fixed income securities (debt and mon