General_and_SIP_ppt

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					        Mutual Funds
An efficient vehicle for wealth creation
                   Fund structure & constituents



3-tier structure

∞ Sponsor

∞ Trustee

∞ AMC
                              Advantages of Mutual Funds



∞ Portfolio diversification

∞ Professional management

∞ Reduction in risk and transaction cost

∞ Tax efficiency

∞ Liquidity

∞ Convenience and flexibility
                                                     Risk and Return


Return
                                                                  Sectoral
                                                                  funds
                                                         Equity
                                                         funds
                                                 Index
                                                 funds
                                      Balanced
                                      funds
                              Debt
                              Funds
                      Gilt
                      funds
            ST debt
            funds
   Liquid
   funds                                                     Risk
                              Principles in Debt Valuation



∞ Increase in interest rate  Decrease in Bond price

∞ Decrease in interest rate  Increase in Bond price

∞ Change in bond price = f (tenor of the bond)
                                       Principles in Debt Valuation

 1 month                3 months               6 months                    1 year



      Higher the Average Maturity,                                             8.5%
                                                                              (8 yrs)
       higher the risk (volatility),
           higher the return.                                                  7.5%
                                                                              (4 yrs)

                                                                                6.5%
                                                                              (2 yrs)


                                                                                5.5%
                                                                            (0.5 yrs)




                               PERIOD
Above returns are assumed purely for simplification & are not indicative
                      Measurement of Risk and Return


∞ Return Methods
    Change in NAV
    Total Return
    Total Return with dividend re-investment
    CAGR

∞ Risk
    Standard deviation
    Beta and Ex-Marks

∞ Benchmark and comparison
                             Concept of Financial Planning



∞ Financial planning

∞ Identifies all the financial needs of a person

∞ Translates the needs into monetarily measurable goals

∞ These goals can be short term, medium term and long
  term

∞ Plans the financial investments that will allow these goals
  to be met.
                             Attributes of a Good Financial
                                                   Planner


∞ Understands:
     The universe of investment products
     Risk-return attributes
     Tax and estate Planning
∞ Has the ability to convert life cycles of investors into
  need and preference based financial products
∞ Organised approach to work
∞ Excellent communication and interpersonal skills
                                Process of FP in Practice



∞ Step I: Establish and define the relationship with the
  client

∞ Step II: Define the client’s goals

∞ Step III: Analyse and evaluate client’s financial status

∞ Step IV: Determine and shape the client’s risk
  tolerance level
                                  Process of FP in practice



∞ Step V: Ascertain client’s tax situation

∞ Step VI: Recommend the appropriate asset allocation
  and specific investments

∞ Step VII: Executing the plan

∞ Step VIII: Periodic Review
                                MFs in Financial Planning


∞ Forms the core foundation and building block for any
  type of FP

∞ Variety of products available to suit any need or
  combination of needs

∞ Barring life and property insurance, rest of the product
  portfolio can be created out of bouquet of MFs
                                    Products Available



∞ Physical Assets – Gold & Real Estate
∞ Bank Deposits
∞ Corporate –Shares, Bonds, Debentures & Fixed
  Deposits
∞ Government – G. Secs, PPF, RBI Relief Bonds and
  other personal Investments
∞ Financial Institutions – Bonds, Shares
∞ Insurance Companies – Insurance Policies
                             Why MF is the Best Option



∞ Mutual funds combine the advantages of each of
  the investment products

∞ Dispense the short comings of the other options

∞ Returns get adjusted for the market movements
Systematic Investment Plan
       Invest as you earn
                              Historically, Equity is the Only Wealth
                                                              Creator
                    1980 – 2004, % CAGR Pre tax
           20%                                                 18%
           18%
           16%
           14%                                                             Real Return
           12%                      10%          11%
           10%
                                     Tax          Tax                      Tax
             8%
             6%       7%                                                    Inflation
             4%
             2%
             0%
                      Gold       Bank FDs       G-Secs        Equity



    Investments should give positive Post-Tax, Post-Inflation return, over a
       long period. In this sense,                                  Not
                      investing in Equity could be risky
Source: CLSA. Inflation: 7.47% CAGR. Rate of tax: 30%, performance may or may not sustain
in future.
                     Equity Investing = Business
                                      Ownership




  Investing in equity is like investing in
 business; it takes time to reward. But
usually the reward is much higher over a
              longer period
                         Equity is Imperative for Wealth
                            Creation, but Remember…



'Oct: This is one of the dangerous months to
invest in stocks. Other dangerous months are
July, Jan, Sep, April, Nov, May, March, June,
Dec, Aug & Feb.‘

                                             Mark Twain


    Habit of “Timing” the market could be dangerous
                                           Time In, Not Timing, the Market
                                                           Creates Wealth
           Frequency Distribution of Sensex Returns^
                                              3 Years       5 Years         7 Years
             BSE Sensex*        1 Year
                                              CAGR          CAGR            CAGR
                Negative
                Returns         32.03%        12.97%         7.58%          0.04%

                0 to 10%        14.92%        30.72%        22.58%          25.50%

                10 to 20%       12.07%        17.26%        25.51%          25.04%

                20 to 30%        6.47%        14.62%        24.08%          39.69%

               30 to 50 %       10.34%        19.05%        19.86%          9.73%

              Above 50 %        24.17%         5.38%         0.39%          0.00%


             Staying invested improves probability of earnings

^ Rolling Returns * Period – Since BSE Sensex inception in 1979 till 2004
                              Timing the Market Vs. Time in the
                                                       Market
        Good Timing                        Bad Timing
       Investing each year              Investing each year at
        at the lowest point             the highest point in the
            in the market                       market
          1979 - 2004                        1979 - 2004




     Average Annual Return             Average Annual Return

            19.4%                              18.1%

Wealth creation is an evolutionary and gradual process. Over
      a long period, “discipline” matters – not “Timing”
                             Time-honoured Investment
                                            Strategies


∞ Start investing early
∞ Invest regularly
∞ Invest systematically, without heeding short-term
  market dynamics




       The secret of wealth creation lies in being
            disciplined, not in being lucky
                                                         Start Investing Early

                            Power of Compounding

   You start investing in a diversified
   equity mutual fund through a
   Systematic Investment Plan at age                    35             40
   # Your monthly investment                         Rs. 5000       Rs.5000
   # You stop investing at age                          60             60
   # Your total contribution                      Rs.15,00,000 Rs.12,00,000
     Your Savings could grow to*                 Rs. 1,37,82,804 Rs. 66,35,367
    Difference = Rs. 71 lakhs! (Investment amount difference Rs. 3 lakhs)

    Compounding allows your money to grow exponentially over
                   time. Start investing early.
* Assumes compounded annual returns of 15%over the entire period
                                                                                                                    Guesswork in Action

           Hickory Dickory Dock…Greed and Fear in action
9,000                                                                                                                                                   Greed: Buy
                                                                            BSE Sensex
8,000

7,000
                                                                                                                  Greed: Buy
6,000            Greed: Buy
                                                                                                                                                             Fear: Sell
5,000
                            Greed: Buy
4,000
                                                            Greed: Buy                                                              Fear: Sell
                 Fear: Sell
3,000

                                                        Fear: Sell                                     Fear: Sell
2,000
        Jan-00



                            Sep-00

                                      Jan-01



                                                          Sep-01

                                                                   Jan-02



                                                                                     Sep-02

                                                                                              Jan-03



                                                                                                                  Sep-03

                                                                                                                           Jan-04



                                                                                                                                               Sep-04

                                                                                                                                                        Jan-05



                                                                                                                                                                          Sep-05
                   May-00




                                               May-01




                                                                            May-02




                                                                                                         May-03




                                                                                                                                      May-04




                                                                                                                                                                 May-05
                                     Invest in Equity through SIP route…
                    Invest Regularly &
                        Systematically




   Invest through SIP
              &
Make volatility work for you
                                                     Benefits of SIP


∞Rupee Cost Averaging
   When NAV rises, SIP lowers average cost of purchase
   When NAV falls, SIP procures more units

∞Compounding Benefit
   Early bird advantage
∞Convenience
   Disciplined saving habit
   Auto debit facility
   Switch / systematic transfer
   Lower entry load

       SIPs work best over a period of time &
        There is no wrong time to start a SIP
                      Market Level does not Really Matter
                                        Much Because…

∞ A lot of investment opportunities exist beyond top few
  companies
      Market has promising depth…
         Over 4700 companies listed on BSE
         BSE, among the top 5 stock exchanges worldwide in terms of
         number of transactions
         BSE 100 accounts for only 32% of total market cap
      …and breadth
         Investment opportunities across sectors and market cap
∞ Power of active fund management
      Driven by research and diversification

       Invest in Equity through Mutual Funds…
                               Markets v/s Mutual Funds


∞ Sensex first touched 6000 mark in Feb 2000
∞ Then drifted and tumbled to below 3000 mark
∞ Sensex second time touched 6000 mark in Jan
  2004




  Let us see how Mutual Funds fared during this period…
                                                                                                                                    Advantage Mutual Funds

      Sense                                                                                                                                                                                                                            NAV*
        x                                              Sensex v/s Mutual Fund Performance                                                                                                                                              (Rs.)
      Value
       9,500
                                                                                                MFs double the capital                                                                                                                 20
       8,500

       7,500                                                                                                                                                                                                                           15

       6,500                                                                                    Sensex hardly recovers
                                                                                                                                                                                                                                       10
       5,500

       4,500
                                                                                                                                                                                                                                       5
       3,500

       2,500                                                                                                                                                                                                                           0
               Feb-00




                                                                     Feb-01




                                                                                                                           Feb-02




                                                                                                                                                                                 Feb-03
                                                            Dec-00




                                                                                                                  Dec-01




                                                                                                                                                                        Dec-02




                                                                                                                                                                                                                              Dec-03
                                 Jun-00




                                                                                       Jun-01




                                                                                                                                             Jun-02




                                                                                                                                                                                                   Jun-03
                                                   Oct-00




                                                                                                         Oct-01




                                                                                                                                                               Oct-02




                                                                                                                                                                                                                     Oct-03
                                          Aug-00




                                                                                                Aug-01




                                                                                                                                                      Aug-02




                                                                                                                                                                                                            Aug-03
                                                                              Apr-01
                        Apr-00




                                                                                                                                    Apr-02




                                                                                                                                                                                          Apr-03
Source: CRISIL MF Portfolio Tracker * AUM Weighted Average NAV of equity category. Past
performance may or may not sustain in future.
                                                                                                                                                         SIP in Kotak 30

    SIP of Rs.10,000 per month, since inception of Kotak 30 (Jan
       99) would have grown to Rs.26,35,958 on 13th Dec 05
   700
   600
   500                                                BSE Sensex v/s Kotak 30
   400                                                                       (Indexed values)
   300
   200
   100
     0
          an-99
                  May-99
                           Sep-99
                                     an-00
                                             May-00
                                                      Sep-00
                                                                an-01
                                                                        May-01
                                                                                 Sep-01
                                                                                           an-02
                                                                                                   May-02
                                                                                                            Sep-02
                                                                                                                      an-03
                                                                                                                              May-03
                                                                                                                                       Sep-03
                                                                                                                                                 an-04
                                                                                                                                                         May-04
                                                                                                                                                                  Sep-04
                                                                                                                                                                            an-05
                                                                                                                                                                                    May-05
                                                                                                                                                                                             Sep-05
         J




                                    J




                                                               J




                                                                                          J




                                                                                                                     J




                                                                                                                                                J




                                                                                                                                                                           J
                                                                                   Kotak 30                     BSE Sensex
* Dividends of Kotak 30 assumed to be reinvested in the scheme, at ex-dividend NAV. Dividend
not taken into account.
                                                                    SIP in Kotak 30



      Rs.1000 invested in Kotak 30 every month…


                                 Last 1 Year Last 3 Years Last 5 Years
     Investment Amount            Rs.12,000           Rs.36,000           Rs.60,000
     Investment Value              Rs.15670           Rs.77,855          Rs.173,641

     XIRR                          61.15%              57.10%              44.04%


                       Fund performance also matters

* Dividends of Kotak 30 assumed to be reinvested in the scheme, at ex-dividend NAV. Dividend
not taken into account.
                Food for Thought




    To make a million,
start with $2.000,000
        Morton Shulman
                                                                    SIP @ Kotak

   ∞Minimum amount: Rs.1000 every month / quarter
          Rs.500 in case of Kotak ELSS
   ∞Minimum number of installments: 6
   ∞Can be thru ECS Debit (in select locations) or thru Post
    Dated Cheques
   ∞Initial investment on any day; SIP / STP dates: 1st, 7th, 14th,
    21st
   ∞For SIP / STP amount below Rs.25 lacs per installment in
    Kotak Equity FOF / equity and balanced schemes*
          Entry load: 1.00%
          Exit load: 1.25% for redemption before 2 years (except in Kotak ELSS)
   ∞For further details on terms, please contact your financial
      advisor
* Not applicable for investments by FIIs / sub a/c of FIIs / FOFs
                                                                    Risk Factors

Mutual Funds and securities investments are subject to market risks and there is no
assurance or guarantee that the objectives of the Scheme will be achieved.*As with
any securities investment, the NAV of the Units issued under the Scheme can go up
or down depending on the factors and forces affecting the capital markets.*Past
performance of the Sponsor does not indicate the future performance of the
Scheme.*Kotak 30 is only the name of the Scheme and does not in any manner
indicate either the quality of the Scheme, future prospects or returns.*The NAV of the
Scheme may be affected, inter alia, by changes in the market interest rates, trading
volumes, settlement periods and transfer procedures.*Appreciation of the value of the
Units issued under the Scheme can be restricted in the event of a high asset
allocation to cash, when stock appreciates *Tax laws may change, affecting the return
on investment in Units. Statutory: Kotak Mahindra Mutual Fund has been established
as a trust under the Indian Trusts Act, 1882, by Kotak Mahindra Bank Limited (liability
Rs. NIL) with Kotak Mahindra Trustee Company Limited as the Trustee and with Kotak
Mahindra Asset Management Company Limited as the Investment Manager. Before
investing, please read the Offer Documents. We, Kotak Mahindra Asset Management
Company Limited, and/or our employees, have long/short positions in the securities in
respect of which investment advice is being rendered. Investment Objective: To
generate capital appreciation from a portfolio of predominantly equity and equity
related securities with investment in, generally, not more than 30 stocks.

				
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