Embed Size (px)
DESCRIPTION
Ppt on asset allocation by P Kumar
Citation preview
Equity
Debt
Cash
Sequence of Presentation
Asset Allocation
Live Example
Querries
Why Financial Planning
• Cost of education and medical increasing exponentially.
Inflation
• Expected to increase from 64 to 75 years in coming decade.
Rising Life Expectancy
• Protection against uncertainty.Protect Lifestyle
of Family
• Investment and protection.Balanced Asset
Allocation
Balanced Growth
Preservation of Capital
Income
Asset Allocation Models
Ris
k
Lo
w
Hig
h
Recent Regulatory Developments inIndian Financial Sector
SEBI Act 1972.
Screen based trading.
T+2 trading cycle.
Derivatives trading.
Demutualization.
Depositories act.
Indian capital market
Primary
Secondary.
Equity brokerages.
Industry outlook.
Objective
Asset Allocation
Model
Optimum
portfolio mix
Investor behavior
Obtain maximum returns with
minimum risk
Risk appetite of investor
Model Methodology
Goal Setting.
Inflation Adjustment.
Saving Plan & Required Return.
Asset Allocation Decision.
Fitting the Portfolio for Investor.
Goal Setting
Amount required at retirement
For same quality of
life at present
Equals to Goal
Amount
Inflation Adjustment
Goal Amount
Inflation adjusted amount
Inflation
compounding
Saving Plan & Required Return
Required rate of return
Savings Plan
Goal Amount
No of Years
Asset Allocation Decision
Equity Allocation
• High Risk• Approx return 20% per year.
Debt Allocation
• Medium Risk• Approx return 10% per year.
Cash Allocation
• No Risk• 5% in short term FDs.
Fitting the Portfolio
Total Assets
Equity
Direct
Equity
Diversified
Equity MF
Debt
Govt / Corporate
Bonds
Income
Funds
Cash
Short Term
FD
Saving
Balance
Risk Appetite & Age
70
40
20
0
10
20
30
40
50
60
70
80
25-35 35-45 45-55
25-35
35-45
45-55
Debt Equity Distribution
0
20
40
60
80
100
120
25-35 35-45 45-55
Cash
Debt
Equity
Results and Findings
Young & Early
High risk appetite
No liability
Maximum equity
Mid Career
Medium risk
Dependent
Family
Balanced assets
Retirement
Threshold
No risk appetite
Maximum savings
Protected portfolio
Recommendations
Annual rebalancing of portfolio.
Avoid market timing.
Moderate mix of debt and equity as per risk profile.
Growth stocks for young and value stocks for old investor.
