asset allocation by p kumar
DESCRIPTION
Ppt on asset allocation by P KumarTRANSCRIPT
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Equity
Debt
Cash
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Sequence of Presentation
Asset Allocation
Live Example
Querries
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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
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Balanced Growth
Preservation of Capital
Income
Asset Allocation Models
Ris
k
Lo
w
Hig
h
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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.
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Objective
Asset Allocation
Model
Optimum
portfolio mix
Investor behavior
Obtain maximum returns with
minimum risk
Risk appetite of investor
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Model Methodology
Goal Setting.
Inflation Adjustment.
Saving Plan & Required Return.
Asset Allocation Decision.
Fitting the Portfolio for Investor.
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Goal Setting
Amount required at retirement
For same quality of
life at present
Equals to Goal
Amount
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Inflation Adjustment
Goal Amount
Inflation adjusted amount
Inflation
compounding
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Saving Plan & Required Return
Required rate of return
Savings Plan
Goal Amount
No of Years
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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.
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Fitting the Portfolio
Total Assets
Equity
Direct
Equity
Diversified
Equity MF
Debt
Govt / Corporate
Bonds
Income
Funds
Cash
Short Term
FD
Saving
Balance
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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
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Debt Equity Distribution
0
20
40
60
80
100
120
25-35 35-45 45-55
Cash
Debt
Equity
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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
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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.
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