Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Retiring in 1980s
Retiring in 2014s
retirement period
Inflation
Increased Medicare exigencies
Life expectancy on the rise
Inflation
7
Rs 9
Rs 75
Rs 15
Rs 76
Rs 150
Rs 425
Rs 525
Rs 3235
Rs 760
135,686
96,742
68,976
49,179
25,000
Today
35,064
10
15
20
25
30
11
Inflation assumed @ 7% p.a.
12
HEALTH COST
Medical cost rising year on year basis at more than 10% for last four years
78% of total health expenditure in India is Privately funded by patients
In 2004 around 30% in rural and 20% in urban India didnt go for any treatment
purely for financial reasons
Around 47% of hospital admission in rural India and 31% in urban India were
financed by loans and sale of assets
14
70.96 years
81.37 years
78.37 years
76.47
years
15
CIA world fact-book as on 1.1.2011
66.29 years
68.51 years
82.25 years
70.06 years
74.68 years
66.00 years
66.80 years
75.73 years
82.14 years
71.33 years
16
CIA world fact-book as on 1.1.2011
82.00
80.70
80.00
79.20
78.00
77.40
76.00
75.20
74.00
72.70
72.00
70.00
69.70
68.00
66.00
64.00
62.00
2021-26 2031-36 2041-46 2051-56 2061-66 2071-76 2081-86
Source prb.org
17
Age Group
2000
2015
2025
2030
2035
2040
2050
014 years
347
345
337
327
313
300
285
34.14%
27.68%
24.63%
23.08%
21.53%
20.2%
18.6%
1559 years
593
782
865
895
919
937
938
58.31%
62.76%
63.15%
63.16%
63.17%
63.1%
61.26%
=> 60 years
77
119
167
195
223
248
308
7.55%
9.56%
12.22%
13.76%
15.3%
16.7%
20.14%
Total*
1,017
1,246
1,369
1,417
1,455
1,485
1,531
20
Successfully
prepare for
Retirement
Failure to
prepare for
Retirement
21
Inflation
Expensive Medicare facility
23
24
25
As investment horizon
increases the risk of
The
downside lower returns keeps
risk is higher in decreasing
As the investment
horizon increases the
minimum
return
observed also keeps
increasing
A study of 1,3,5 and 10yr returns on daily rolling basis for BSE Sensex. Returns more than 1 yr taken as
CAGR return. Daily closing values were considered as investment and selling price assumption.
BSE value source: www.bseindia.com
26
1yr
3yr
5yr
10yr
19.55%
19.33%
22.84%
15.89%
820
291
2663
2164
1657
418
Probability of loss
30.8%
13.4%
0.0%
0.0%
Maximum return
114.69%
60.81%
47.26%
19.74%
Minimum Return
-57.65%
-18.12%
2.13%
10.47%
34%
18%
11%
2%
Average returns
Standard Deviation
A study of 1,3,5 and 10yr returns on daily rolling basis for BSE Sensex. Returns more than 1 yr taken as
CAGR return. Daily closing values were considered as investment and selling price.
27
BSE Sensex value source : www.bseindia.com
28
29
Lets take a case of 4 friends Amit, Basu, Chandan and Dinesh who started
investing at different ages and higher than the person who started earlier than
them:
Amit
Basu
Chandan
Dinesh
25
35
45
55
60
60
60
60
1000
2000
4000
8000
Two times
Four times
Eight times
4,20,000
6,00,000
7,20,000
4,80,000
37,96,638
26,53,667
16,57,881
6,19,497
10%
10%
10%
10%
Returns on investment
(Assumed)
30
4,000,000
Rs.37,96,638
3,500,000
Amit
3,000,000
Rs.26,53,667
Basu
2,500,000
Chandan
Dinesh
2,000,000
Rs.16,57,881
1,500,000
1,000,000
Rs.6,19,497
500,000
0
26
36
AGE
46
56
Rising early and to start investing early both benefit over the long term!
Assumed investment done till retirement age of 60yrs earning annual return of 10%
31
32
5Y CAGR
10Y CAGR
15Y CAGR
Gold
17.8%
15.4%
8.6%
10-year treasuries
4.7%
6.0%
6.7%
5.2%
4.6%
5.1%
16.6%
13.7%
6.5%
13.7%
16.8%
13.2%
6.50%
5.40%
5.40%
6.20%
5.50%
5.30%
Performance of various assets class over a 15 year period. Gold is the best performing
asset over the past five years. However, equities remain the best performing asset class
over the past 10 & 15 years.
33
Source : Morgan Stanley Research 9th Feb11 . All returns are post tax returns
34
ASSET ALLOCATION
Asset allocation is the highest contributor to risk reduction in a portfolio which
results in a higher risk adjusted return
Impact of Asset allocation on return variability ( Risk Reduction)
Asset Allocation Strategy
91%
Security Selection
5%
Market Timing
2%
Other Factors
2%
36
38
People looking at the market levels to invest try to time the market
People feel if they regularly time their investments in market they will yield better
returns than others
Now lets take a case of two friends Lucky and Not So Lucky. Lucky was able to pick
the market low every month and invested Rs.1000/- while Not So Lucky was
always finding himself investing at the market high every month.
Both invested Rs.1000/- every month from Jan 2000 till Aug 2011.
Can you guess the difference between returns both earned?
Rs.1000 invested every month assuming Lucky invests at the lowest intraday point
of the month while Not So Lucky invests at the highest intraday point of the
month.
39
*BSE monthly high and low price value source: www.bseindia.com
20000
15000
Rs. 384011
Rs. 341750
10000
5000
Lucky
Not So Lucky
1,40,000
1,40,000
3,84,012
3,41,750
16.23%
14.42%
1.81%
Jul/11
Jan/11
Jul/10
Jan/10
Jul/09
Jan/09
Jul/08
Jan/08
Jul/07
Jan/07
Jul/06
Jan/06
Jul/05
Jan/05
Jul/04
Jan/04
Jul/03
Jan/03
Jul/02
Jan/02
Jul/01
Jan/01
Jul/00
Jan/00
40
%
Return
2013
2012
25
2010
17
2004
13
2002
It pays to be an optimist
25/34 = 73% odds
Year
%
Return
1997
19
Year
%
Return
2001
-18
1994
17
2007
47
2000
-21
1993
29
2006
47
Year
%
Return
1998
-16
1989
17
2005
42
2009
81
1996
-1
1984
1992
37
2003
73
Year % Return
1995
-21
1983
1990
35
1999
64
2011
-25
1987
-16
1982
1988
51
1991
82
2008
-52
1986
-1
1980
25
1981
54
1985
94
41
>Source:
-25 BSE
- 25 to 0
0 to 30
30 to 60
> 60
42
43
44
Unit holders have a choice to move between Plans as their needs change
Each plan under the Fund follows a different investment pattern / style to
cater the needs of different investor classes at different stages of their
lifecycle
Only Growth Option available under all the Plans
45
Risk Profile
Minimum
Maximum
85
100
High
15
Low to
medium
Other Securities
10
High
46
Moderate Plan:
Risk Profile
Minimum
Maximum
65
85
High
15
35
Low To
Medium
Other Securities
10
High
47
Risk Profile
Minimum
Maximum
30
High
70
100
Low To
Medium
Other Securities
10
High
48
49
Auto Switch facility based on the predefined age criteria of the investors
(optional for investors)
51
*Quarterly
*The withdrawal amount is fixed and paid till sufficient AUM is available
52
FUND HIGHLIGHTS
Particulars
Minimum Investment
Additional investments ( Existing Investor )
Minimum SIP investments
Monthly SIP
Quarterly SIP
Load Structure
Entry Load
N.A
Exit Load
If redeemed/Switched out after the age of 60yrs
NIL
In case of Auto-Switch out of units on occurrence of
NIL
'Auto-Switch Trigger Event'
For Redemption or switch out of units in other cases (i.e. switch-out other than auto switch-out on trigger
event & redemption/switch-out before the attainment of retirement age i.e. 60 years) following exit load
will be applicable
Redeemed or Switch-out of units:
Before 3 yrs
3% of applicable NAV
After 3 yrs till age 60yrs
1% of applicable NAV
53
54
55
INVESTMENT STRATEGY
INVESTMENT FOCUS
The fund to be predominantly large cap, with some well managed mid cap
companies as well.
Given the level of uncertainty globally, arising out of sovereign debt crisis in some
euro zone countries, the fund to focus on building the portfolio gradually and in a
systematic manner initially.
Sector Overview
Software
US economy is showing signs of growth in demand which is a positive for the IT
sector
A depreciated rupee may also benefit the sector
Auto Ancillaries
Low segment penetration, demographics and urbanization would be key drivers of
growth for the sector over the longer term
Attractive valuations
Sector may benefit from replacement demand
58
Sector Overview
Consumer Non-durable
Though the volume growth is under pressure, good agricultural output may reduce
pressure going forward
Companies with increasing rural presence and good distribution network may do
better
Lower inflation due to good agriculture output may lead to improved sales and
margins
59
HAPPY RETIREMENT
60
Nature & Investment Objective: Tata Retirement Savings Fund (TRSF): An Open Ended Fund
comprising of three Plans: (i) Progressive Plan (an open ended equity scheme) - (TRSFP). (ii)
Moderate Plan (an open ended equity scheme) (TRSFM). (iii) Conservative Plan (an open
ended debt scheme) (TRSFC). The objective of the Fund is to provide a financial planning tool
for long term financial security for investors based on their retirement planning goals. However,
there can be no assurance that the investment objective of the fund will be realized.
Applicable Load Structure for SIP and Non- SIP Transactions under all the Plans of the Fund:
Entry Load: N.A. for all the plans under the fund. Exit Load: (A) If redeemed / switched-out
on or after attainment of retirement age i.e. 60 years of age Nil. (B) In case of Auto switchout of units on occurrence of Auto-switch trigger event Nil. (C) For Redemption or switch
out of units in other cases (i.e. switch-out other than auto switch-out on trigger event &
redemption/switch-out before the attainment of retirement age i.e. 60 years) following exit
load will be applicable: (i) If redeemed / switched-out on or before expiry of 1 year from the
date of allotment 5% of the applicable NAV; (ii) If redeemed / switched-out after 1 year but
on or before expiry of 2 years from the date of allotment 4% of the applicable NAV; (a) If
redeemed / switched-out after 2 years but on or before expiry of 3 years from the date of
allotment 3% of the applicable NAV; (b) If redeemed / switched-out after 3 years but on or
before expiry of 5 years from the date of allotment 2% of the applicable NAV; (c)If redeemed
/ switched-out after 5 years from the date of allotment 1% of the applicable NAV.
61
Unlike popular perception of low cost option for Retirement Savings NPS is
not a cheaper option
NPS has very high annual maintenance charges amounting to 5.87% of the
minimum investments Rs.6000/- (assuming Rs.500 min deposited monthly)
Source: www.pfrda.org.in
62
Particulars
Transaction Charges
Transaction charges
as above
No additional charges as
opening an NPS I account
is mandatory for opening
NPS II account
Transaction charge
Rs.6/- per transaction
Transaction charge
Rs.6/- per transaction
Maximum allowed
exposure to equity is
50%
Maximum allowed
exposure to equity is 50%
Source: www.pfrda.org.in
63
Particulars
Partial or full
withdrawal
Compulsory
Annuity purchase
Maximum age of
investment
Auto Switch
mode of
investments
Available
Not Available
No
Yes
Yes
No Age limits
Only up to 60yrs
Only up to 60yrs
Yes
Yes
Yes
Source: www.pfrda.org.in
64
As investment
horizon increases the
risk of lower returns
keeps decreasing
As the investment
horizon increases the
minimum
return
observed also keeps
increasing
A study of 1yr, 3yr, 5yr and 10yrs SIP returns on annual rolling basis for BSE Sensex. Returns
more than 1 yr taken as CAGR return. Daily closing values were considered as investment
65
and selling price.
BSE price value source: www.bseindia.com
Time Periods
1yr
3yr
5yr
10yr
30.41%
25.05%
24.56%
21.30%
11
Probability of loss
27.27%
22.22%
0.00%
0.00%
Maximum return
112.83%
48.16%
45.24%
21.87%
Minimum Return
-46.22%
-19.06%
2.17%
20.74%
Standard Deviation
44.50%
23.55%
16.38%
0.80%
Average returns
A study of 1yr, 3yr, 5yr and 10yrs SIP returns on annual rolling basis for BSE Sensex. Returns
more than 1 yr taken as CAGR return. Daily closing values were considered as investment and
selling price.
66
BSE price value source: www.bseindia.com
$1 invested in equity would have yielded $12.7 million over a period of 200 years
beating all the other asset classes.
This proves the long term track record of equities over all other asset classes.
67
- from the book Stocks for the long run by Jeremy J Siegel Wharton School Professor
It is not possible that one would be able to time the market consistently all the time
Missing just small number of good days in the market would lead to major differences in your
returns
70000
60000
Fully Invested
50000
Rs. 51,839
40000
30000
20000
Rs. 24,333
10000
0
Assuming Rs.10,000 invested in BSE Sensex on 03rd Sept 2001 and held till 31st Aug 2011. Daily returns
were considered to know its Impact on the invested value.
68
BSE daily price data: www.bseindia.com
70000
60000
50000
Fully Invested
Missing 25 best days
Rs. 51,839
40000
30000
20000
10000
Rs. 11,280
Assuming Rs.10,000 invested in BSE Sensex on 03rd Sept 2001 and held till 31st Aug 2011. Daily returns
were considered to know its Impact on the invested value.
BSE daily price data: www.bseindia.com
69
Particulars
Asset Allocation based on
Age
Compulsory buying of
annuities
Tata
Unit Linked Traditional New Pension
Retirement
Pension Plan Pension Plan
System
Savings Fund
Yes
No
No
Yes
No
No
Yes
Yes
No
Huge entry
load
Huge entry
load
High account
opening
charges
Yes
Yes
No
Yes
Suitable to a young
person
Yes
No
No
No
High charges of
policy/investment
management
No
Yes
Yes
Yes
70