For a 44-year old investor with a 5-year time horizon, an appropriate asset allocation would be 60% equity and 40% debt. For an 8-year time horizon, a more aggressive 70% equity and 30% debt allocation is suitable, as it allows more time for the investor's goals to be met and for short-term market fluctuations to correct themselves. The document provides guidance on factors to consider for asset allocation such as investment objectives, risk tolerance, and net worth. It also outlines asset allocation thumb rules and exceptions.

1. IDENTIFY AN ASSET ALLOCATION MIX FOR AN
INVESTOR AGED 44 WITH A TIME HORIZON OF
1) 5 YEARS 2) 8 YEARS.
Presented by
Abhimanyu
Himanshu
Vipula

2. Contents
• Case study
• Asset allocation
• Young vs. old
• Thumb rule of asset allocation
• Exception
• Asset allocation for 5 years
• Asset allocation for 8 years
• Conclusion

3. Case study
• Mr. Shantanu living New Delhi is an High Net worth Individual businessmen. He is having good
financial knowledge.
• His family comprises of his Wife (42 years), Daughter (15 years) and Son (20 years).
• He lives a lavish lifestyle and travels a lot.
• Earlier his asset allocation was different according to his risk taking capacity.
• In his liabilities
He is having a home loan
Will need money for her daughter’s education and son’s marriage

4. Asset allocation

5. Factors to consider while asset allocation
• Investment objective ( Eg. Retirement planning)
• Time horizon for the goal (short term or long term )
• Net worth
• Amount to be invested
• Risk tolerance and experience

6. Process
• It is based on the premise that the
different asset classes have varying cycles
of performance, and that by investing in
multiple classes, the overall investment
returns will be more stable and less
susceptible to adverse movements in any
one class.
• All investments involve some sort of risk,
whether it’s market risk, interest risk,
inflation risk liquidity risk, tax risk. An
individualized asset allocation strategy
seeks to mitigate the risks of any one asset
class though diversification and balance.
Set your
financial
planning
objectives
Set strategic
allocation
Add asset to
build up
portfolio
Monitor asset
allocation
regularly
Rebalance your
portfolio

7. Young vs old

8. Thumb rule
• This is the thumb rule used for asset allocation. Subtract your age from 100 to find how much of your
portfolio should be allocated to equities
Age 30
Equity : 70%
Debt : 30%
Age 60
Equity : 40%
Debt : 60%

9. Exception to thumb rule
If we talk about traditional asset allocation it is having some exceptions
1. If the average Life expectancy is increasing.
2. Risk taking capacity of the investor.
3. Investable surplus of the investor .
4. Experience of investor .
5. Performance of funds.

10. Deciding between Debt vs. Equity
• Investment objectives - The objective could be to income generation or wealth creation. Debt is advisable
for those looking to generate income through their investments because it provides more certainty of return.
However for growth and wealth creation, equities would be a better option depending on the investment
duration and return expectation.
• Investment duration - Investors should select the asset class based on the time period at the end of which
they will need the money, for example, 20 years. Debt funds are better for shorter durations, preferably 5
years or less. Equity funds should ideally be held for duration longer than 5 years.
• Returns expected - A number of investors choose an asset class (Debt or Equity) with unrealistic
expectations. Returns from each come with varying degrees of risk and uncertainty. On a long-term average
basis, returns for debt are in the region of 9% and equity in the region of 16%.
• Tax applicable – Equity investments are highly tax efficient with zero tax for holdings longer than 1 year.
Debt funds, on the other hand, attract short-term capital gains tax before 3 years and long term capital gains
with indexation after 3 years.

11. Asset allocation 5 years
Goals for asset allocation for 5 years
1.Need to pay for education of his
daughter
2.Planing to buy a new car
3. Emergency funds

12. Asset allocation 8 years
Goals
1. Son’s marriage,
2. Pay off house loan,
3. Purchase a car,
4. Planning a trip to London on their silver jubilee,
5. Emergency liquidity.

13. Best equity funds to buy
http://www.moneycontrol.com/mutual-funds/best-funds/equity.html

14. Best debt funds to buy
http://www.moneycontrol.com/mutual-funds/best-funds/debt.html

15. Conclusion
As Mr. Shantanu is a High net worth individual so he is having enough surplus to invest
He is also having experience of market thus he can utilize it.
He is a money making man so increasing part of debt more than 40 percent will not be worth full for him
For his ongoing loan he is paying 8.50%, On a long-term average basis, returns for debt are in the region of
9% and equity in the region of 16% so it will be beneficial for him to keep investing as he is having a positive
real rate of return
So Research recommendation for equity over time frame of 5 years and beyond.