INVEST IN MAXIMISER EQUITY

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INVEST IN MAXIMISER(EQUITY)

• IS IT SAFE???

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PAST PERFORMANCE
There are three basic asset categories that an
individual can invest in to accumulate wealth.
These are CASH, DEBT EQUITY. Within the three
basic categories, it has been seen that EQUITY as
an asset class over the long term tends to
outperform the return in other asset
categories. Over the last 24 years, the BSE
sensex has given a compounded annualized return
of 17.05 since its launch in April 1979. Thus,
if one had invested Rs.1 lac in Sensex stocks in
April 1979, the amount would have grown to over
Rs.47 lac in 2003!
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RETURNS FROM VARIOUS ASSET CLASS
17.05
10.8
7.33
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WHY DOES EQUITY PROVIDE SUPERIOR RETURNS ?
This is because when we buy Equity we buy the
growth prospects of wealth creating companies
i.e. entities where rate of growth exceeds their
cost of capital. Mutual Fund managers for long
have been known to accumulate those companies,
which have strong growth prospects and are known
wealth creators. Which are some of these
companies that are the favorites of fund
managers? According to a popularity index created
by CRISIL, the top 10 holdings across equity
diversified mutual funds in July 2003 were as in
the next slide DO THEY FEATURE IN OUR MAXIMISER
? Press Enter
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CRISIL POPULARITY INDEX JULY 2003
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SOME FIGURES

• Reliance Industries
• An investment of Rs.1000 at inception in
  January 1978 would have become about Rs.173,000
  in 25 years or a CAGR of about 22.89
• Infosys
• First public issue in 1993 at Rs.80. CAGR
  since listing works out to a mind-boggling
  83.93. Rs.1000 invested with the company would
  today be worth about Rs.4.43lacs
• Hero Honda
• Worlds single largest two-wheeler company.
  The share has returned a CAGR since initial
  listing of about 27.09

CAGR Compounded Annual
Growth Rate
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ICICI PRU MAXIMISER

• 52.2 since inception
• (as on December 31, 2003)

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Sundaram SKORe study(Sundaram Key to Optimum
Returns)
A proprietary study by Sundaram Mutual Fund also
shows how staying invested over the longer term
reduces volatility of returns in Equity. The
SKORe took 1 year rolling returns for the Sensex
from April 1979 to March 2001 at intervals of 1
month each. For eg You could start at April
1979 and hold till April 1980, that gives you one
year return. Then move on to May 1979 and hold
till May 1980, that gives you the second one year
return, and so on till March 2001. Of the 252
1-year returns so generated, it ignored top and
bottom 5 of the returns, as these were
relatively rare occurrences. Of the remaining
returns, the best one year period yielded 90,
the worst yielded -26. WHAT IF I HOLD ON FOR
5 OR 10 YEARS ?
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Results are graphically indicated below
44
90
-1
-26
32
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WORST RETURN
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What do we understand from this ?

• As the holding period lengthens, the worst
  returns actually get better and the variation
  between the best and the worst return reduces.

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Does Timing the Entry Work?

• According to a study undertaken by Business
  Standard, two-thirds of the equity markets gains
  came in just 10 months over the last 24 years.
  The chances of correctly identifying these 10
  months for an average investor are pretty remote.
• The study also indicates that Rs.1lac invested in
  1979 would have become
• Rs.34,49,000 if stayed invested always
• Rs.3,65,000 if missed 10 best months
• Rs.86,000 if missed 20 best months
• Rs.1000 if missed 72 best months

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Therefore the only realistic way toward achieving
wealth in the equities market is to stay invested
over the long-term and not in timing the entry.
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What is the ideal Time Horizon?
No single answer to this question but definitely
longer than 5 years, it would also vary according
to the objectives of the investor and targeted
return. A study undertaken by Business World
covering Sensex movements from April 1979 till
February 2002 concluded that 12 years was the
ideal time horizon for holding equities.
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PRODIGIOUS INVESTMENT WEALTH CREATOR Warren
Buffett

• Bill Gates (worlds richest man)
• worth - 46 billion (about Rs.2,00,000 crore)
• Warren Buffett (number two spot)
• worth - 36 billion (Rs.1,65,000 crore)
• Started out with 1,00,000 (lt than Rs.50lac)

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Therefore my FriendTiming is not your
FriendBut, Time is your Friend
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SO, IS EQUITY SAFE ?

• DECIDE FOR YOURSELF..