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Long-term Equity Investing Insights for Optimum Returns

Gain insights on equity market trends, historical data, and investment strategies for long-term wealth creation. Learn about the importance of discipline, compounding, and avoiding market timing pitfalls.

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Long-term Equity Investing Insights for Optimum Returns

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  1. Equity Market Insights Sundaram SKORe Sundaram Keys to Optimum Returns An Investor Education Initiative

  2. All time high & correction begins 22% one-day decline in US, no linkage then Start of five-year bull market Asian Crisis; Unaffected Harshad Mehta Scam Tech bull market & bust First Major Bull Market Annual returns 17.6% for equity index BSE Sensitive Index Deep corrections do not matter for long-term investors Figures as of July 2008; Data Source: Bloomberg; Analysis: In house

  3. Average index level over 29-+ years: 3640 2004–2008 YTD: 11,078 1999–2004: 3998 1994–99: 3568 1989–1994: 1876 1984–1989: 480 1979–1984: 183 Average Sensex levels for five-year blocks Index Levels Almost 25 years of close to or below long-term average Figures as of July 2008; Data Source: Bloomberg; Analysis: In house

  4. Build up of annual returns over the years Long-term average over 29 years: 17.6% Lowest level of annual returns over 25 years: 14.6% Figures as of July 2008; Data Source: Bloomberg; Analysis: In house

  5. Volatility of returns reduces over time • Height of each bar shows the range of returns. Smaller the range shown by the bar, the better for investors • Longer the time frame, the greater is the reduction in risk without an impact on returns Returns % Effective Annual Returns % Data Source: Bloomberg; Analysis: In house using SKORe as of July 31, 2008

  6. Benefit of discipline long-term investing Value now of Re 1 invested in SENSEX over a 29-year period Rs POWER OF COMPOUNDING ON BEST DAYS Rs Rs Rs Rs Significant gains only if you had remained invested at all times Daily Returns since launch to July 2008 Data Source: Bloomberg; Analysis: In house using SKORe as of July 31, 2008

  7. Emphatic NO to market timing Average Annual Returns provided based on the analysis given in the next slide No Market Timing Average annual return: 17.35% • More certain outcome • Low risk Market Timing Average annual return: 17.27% • Close-to-impossible outcome • High risk Figures as of July 2008; Data Source: Bloomberg; Analysis: In house

  8. Time matters, not timing No Market Timing Market Timing Periodic investment every month (Rs 1000) Amount Invested in Sensex: 3,52,000 One-timed investment every year (Rs 12000) Amount Invested in Sensex: 3,52,000 Value Rs Lakh Value Rs Lakh CAGR % CAGR % Date Day Investment every month on specific dates One market-timed investment every year Probability of predicting each day every year successfully is .0040 and over 29 years, almost no chance – only more risk • Certain outcome over the past 29.3 years • Risk only in line with the market and no more • Practical approach for every investor Figures as of July 2008; Data Source: Bloomberg; Analysis: In house

  9. Equity is the superior asset class to beat inflation Compounded annual returns based on investing Rs 1000-a-month Returns in % Only equity outpaces inflation comfortably across time periods Figures as of July 2008 Data Source: Bloomberg; Analysis: In house

  10. Wealth creation in different asset classes Rs 1000-a-month invested over different time periods is now worth Value in Rs lakh Even after the deep correction in 2008, wealth creation in equity is significantly superior to other asset classes Figures as of July 2008 Data Source: Bloomberg; Analysis: In house; Rs 1000-a-month invested n Equity is an investment made in Sensex

  11. Start early to reap maximum benefits Value in Rs lakh Rs 1000 a-month investment till age 55 Portfolio value reckoned at age 60 Asset Allocation: Equity 70% and Fixed Income 30% Returns based on historical average. In the equity, based on the Sensex and in the Fixed income, based on the government bond yield Returns assumed 15.3% Starting age of investing Amount Invested at Rs lakh From age 25, Rs 1000-a-month could deliver Rs 1.55 crore at age 60 Data Source & Analysis: In house

  12. Early start also means more by way of gains Early Start Late Start The returns and values are indicated and not assured Data Source & Analysis: In house

  13. Multiple benefits for longer SIP periods Risk-return profile for SIPs over different periods in Sensex Data Source: Bloomberg; Analysis: In house using SKORe as of July 31, 2008

  14. Importance of investing in difficult phases Analysis based on Rs 1000-a-month SIP between 1997-2006 About 75% of wealth creation attributable to investing during tuff times Daily Returns since launch to July 2008 Data Source: Bloomberg; Analysis: In house

  15. Periodic Table of Investment Returns 1999-2008 YTD RANK RANK Diversified equity funds outpace indices comfortably over ten years Figures as of July 2008; Data Source: Bloomberg; Analysis: In house

  16. Periodic Table of Investment Returns Diversified equity funds: most top quartile presence & absent in 4th quartile Analysis: Sundaram BNP Paribas Asset Management; Methodology: www.sundarambnpparibas.in

  17. Periodic Table of Investment Returns Diversified equity funds and mid cap stocks dominate top end Figures as of July 2008; Data Source: Bloomberg; Analysis: In house

  18. Contact us SMS: SFUND to 56767 Toll Free: 1800-425-1000 www.sundarambnpparibas.in Call: 044 28578700 E-mail:service@sundarambnpparibas.in

  19. Disclaimer Mutual fund investments are subject to market risks. Please read the offer document carefully before taking an investment decision. Risk Factors: All mutual funds and securities investments are subject to market risks, and there can be no assurance or guarantee that fund's objectives will be achieved. NAV may go up or down, depending on the factors and forces affecting the securities market. There is uncertainty of dividend distribution and risk of capital loss. Statutory: Mutual Fund Sundaram BNP Paribas Mutual Fund is a trust under the Indian Trusts Act, 1882 Sponsors (Collective liability is limited to Rs 1 lakh): Sundaram Finance Limited & BNP Paribas Asset Management. Investment Manager: Sundaram BNP Paribas Asset Management Company Ltd. Trustee: Sundaram BNP Paribas Trustee Company Ltd. Past performance of Sponsors//Asset Management Company/Fund does not indicate or guarantee future performance. General Disclaimer: Equity Market Insights is for information purposes only. Equity Market Insights should not be construed as prospectus, offer document, offer, solicitation for an investment or investment advice. Information in this document has been obtained from reliable sources in the opinion Sundaram BNP Paribas Asset Management. Opinions expressed by authors may not necessarily represent that of the organization. The detailed disclaimer/disclosures/risk factors available at www.sundarambnpparibas.in must also be treated as an integral part of this communication.

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