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Class: T.Y.BFM
Subject: Portfolio Management
Semester: V
Date: 28/06/2012
Submitted to:
Prof. Hema Manwani
Group Members
•Harsha Matta
•Yashoda Gehani
•Anil Manghnani
•Kunal Tharwani
•Girish Kanjani
•Uma Keswani

Roll No.21
Roll ...
Portfolio Management
Planning & Goal Setting
Planning for Your Future!
Why do we need Planning?
 To fund our future needs through right mix of investments

 To protect our future from unfores...
Can you do your own Financial Planning?
•

Will your family be financially secure in the event of your unfortunate illness...
Need Of Portfolio Managers
• Understands clients
needs
• Diversify risk and
return
• Skilled and
knowledgable
person
Financial Planning and Asset Allocation

Significance of Asset Allocation

Significance Of Asset Allocation
Determinants o...
Asset Allocation Strategies
Conservative
20%

30%

Moderate
10%

Equities
Bonds

Equities
Bonds

Cash/Money
Market

Cash/M...
1. Determine the Current financial situation.

2. What you wish to achieve?
Your Financial Goals.
3. How much risk you wis...
Financial Planning and Asset Allocation

Asset Classes to Invest
Gold

Art

Debt
Mutual Funds
Financial
Planning

Insuranc...
Financial Planning and Asset Allocation

FINANCIAL PLANNING FOR THE FUTURE……...
Phase I
Phase II
Dependant Phase Accumulat...
Financial Planning and Asset Allocation

FEW EXAMPLES OF
ASSET ALLOCATIONS
Financial Planning and Asset Allocation

INVESTOR PROFILE

Mona, Joydeep ( Age 28 years )

Financial Goals
•Planning to pu...
Financial Planning and Asset Allocation

INVESTOR PROFILE

Sheela, Shekhar ( Age 37 years ) and two kids

Financial Goals
...
Financial Planning and Asset Allocation

INVESTOR PROFILE

Maura & Akash Chaudary

Financial Goals
Retired
Regular Income
...
Future Value

Inflation erodes the value of your money
80000
70000
60000

74,726
55,839

50000
40000
30000
20000
10000
0

...
Based on the information provided and the risk profiling test conducted, we
conclude the following:
1) Your current Net wo...
CURRENT ASSET ALLOCATION
a) Bobby's Higher Education (2013- 2019)
b) Seema's Higher Education (2019-2023)
c) Retirement expense (2026-2046)
d) Mrs....
PERSONAL INFORMATION
•The corpus for all goals except education has factored in inflation @ 7% p.a. Education goals
factor in inflation at 10 %...
ASSUMPTIONS
The following assumptions were made to conduct the analysis:
• Inflation @ 7% for all expenses and goals excep...
CASH FLOW MATCHING ANALYSIS

In view of current economic conditions we recommend you maintain a six month emergency fund i...
INSURANCE REQUIREMENTS
* Protection needed has been estimated by adjusting future goals, expenses at a 7% discount rate
** Please note that the T...
PROPOSED ASSET ALLOCATION
REVIEW & MONITORING
Class

Equity

Debt

Balanced

Total

Amount Invested

200000

400000

400000

100000

Amount In %

20...
STRESS TESTING
Portfolio Management
Portfolio Management
Portfolio Management
Portfolio Management
Portfolio Management
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Portfolio Management

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Portfolio Management

  1. 1. • • • • Class: T.Y.BFM Subject: Portfolio Management Semester: V Date: 28/06/2012 Submitted to: Prof. Hema Manwani
  2. 2. Group Members •Harsha Matta •Yashoda Gehani •Anil Manghnani •Kunal Tharwani •Girish Kanjani •Uma Keswani Roll No.21 Roll No.27 Roll No.29 Roll No.30 Roll No.31 Roll No.55
  3. 3. Portfolio Management Planning & Goal Setting Planning for Your Future!
  4. 4. Why do we need Planning?  To fund our future needs through right mix of investments  To protect our future from unforeseen contingencies  To maintain the same standard of living even after retirement  To enable risk management through diversification  To choose assets commensurate with the investors’ life and wealth stages  To beat the ravages of inflation
  5. 5. Can you do your own Financial Planning? • Will your family be financially secure in the event of your unfortunate illness / demise? • Will the stream of cash flows arising from your asset holdings be sufficient to match the expected liability structure? • Are your finances inherently tax efficient? • Have you made adequate provisions for your children’s education and marriage? • Are you confident enough to enjoy your post-retirement life? If your answer is NO to any one or all of the above questions, you need a specialist to handle your finances...
  6. 6. Need Of Portfolio Managers • Understands clients needs • Diversify risk and return • Skilled and knowledgable person
  7. 7. Financial Planning and Asset Allocation Significance of Asset Allocation Significance Of Asset Allocation Determinants of Portfolio Performance: “Asset Allocation helps explain over 93% of a portfolio’s performance”.
  8. 8. Asset Allocation Strategies Conservative 20% 30% Moderate 10% Equities Bonds Equities Bonds Cash/Money Market Cash/Money Market 45% 50% 45% Aggressive 10% Equities 15% Bonds 75% Cash/Money Market
  9. 9. 1. Determine the Current financial situation. 2. What you wish to achieve? Your Financial Goals. 3. How much risk you wish to take? Your Risk Profile.
  10. 10. Financial Planning and Asset Allocation Asset Classes to Invest Gold Art Debt Mutual Funds Financial Planning Insurance Commodities Equity Real Estate
  11. 11. Financial Planning and Asset Allocation FINANCIAL PLANNING FOR THE FUTURE……... Phase I Phase II Dependant Phase Accumulation phase Phase III Distribution Phase Child’s Marriage Child’s Education Housing Children Marriage 35 yrs 25 yrs Birth & Education 22 yrs Over 25 - 30 yrs Earning Years Age Retirement 60 yrs Age
  12. 12. Financial Planning and Asset Allocation FEW EXAMPLES OF ASSET ALLOCATIONS
  13. 13. Financial Planning and Asset Allocation INVESTOR PROFILE Mona, Joydeep ( Age 28 years ) Financial Goals •Planning to purchase a house in the next 5 - 8 years •Planning for family in 2 years time. •Creating long-term wealth for retirement Investment Strategy Aggressive Growth Portfolio Short-term Bonds 10% 15% Stocks 75%
  14. 14. Financial Planning and Asset Allocation INVESTOR PROFILE Sheela, Shekhar ( Age 37 years ) and two kids Financial Goals •Has a housing loan •Providing for children education (7-10 years) •Planning for child’s wedding •(15 - 20 years) •Take care of old parents •Planning for retirement Investment Strategy Balanced Portfolio Stocks 60% Short-term 15% Bonds 25%
  15. 15. Financial Planning and Asset Allocation INVESTOR PROFILE Maura & Akash Chaudary Financial Goals Retired Regular Income Medical Costs Investment Strategy Stocks 15% Bonds 45% Conservative Portfolio Bank Deposit 40%
  16. 16. Future Value Inflation erodes the value of your money 80000 70000 60000 74,726 55,839 50000 40000 30000 20000 10000 0 41,727 31,180 23,300 5 10 15 20 25 No of Years The slide illustrates the value of Rs 1 Lakh at different stages assuming an average inflation rate of 6%
  17. 17. Based on the information provided and the risk profiling test conducted, we conclude the following: 1) Your current Net worth is Rs 2.99 CRORE 2) Current asset allocation of your investments (Rs1.14 crore) is 19.6% in equities, 12.4% in debt, 8.4 % in Alternative Assets and 59.6% in Cash 3) You have accrued gratuity benefits of Rs 18 lakh (as of June 2010) 4) You have a current insurance cover of Rs 74.7 lakhs (including Sum assured of about Rs62.7 lakhs and accrued bonus of Rs 11.9 lakhs a) Invest Rs 45 lakh from current cash balance in recommended debt investments b) Additional Life insurance of Rs 1.8 crore for a 10 year term
  18. 18. CURRENT ASSET ALLOCATION
  19. 19. a) Bobby's Higher Education (2013- 2019) b) Seema's Higher Education (2019-2023) c) Retirement expense (2026-2046) d) Mrs. Indu Khanna’s expenses (2047-2051) e) Property purchase (2013) f) Health Care fund to meet your and Mrs.Khanna’s medical expenses (from 2031) g) Car for Bobby (2013) a) Bobby's Marriage (2024) b) Seema’s Marriage (2025) c) Annual Holiday (from today) d) Car after retirement (2026) e) Estate (2046)
  20. 20. PERSONAL INFORMATION
  21. 21. •The corpus for all goals except education has factored in inflation @ 7% p.a. Education goals factor in inflation at 10 % p.a. •*Bobby’s and Seema’s Education goal has been evenly distributed over six and four years respectively.
  22. 22. ASSUMPTIONS The following assumptions were made to conduct the analysis: • Inflation @ 7% for all expenses and goals except education • Mrs.Khanna’s yearly expenses between 2047 and 2051 are Rs4,00,000 in today’s terms • Income growth assumed to grow at 7% till retirement • Return on Alternative Investments (Gold and others) assumed at 10% • Return on Cash @ 2% • Emergency fund of 6 months living expenses (including insurance commitments) • Portfolio is rebalanced every year to maintain the current asset allocation (equity, debt, cash and alternative investments) • Incremental savings ploughed back from 2010 till retirement to maintain current asset allocation • Corpus for Goals mature at the end of the year stated. • Savings and other cash inflows are reinvested at the end of the year. • Post-tax returns applied as effect of Direct tax code likely to impact aggregate rate of return especially post-retirement. • Gratuity and SBI Life Insurance policies have been assumed to mature and be available for the plan at retirement in 2020 • For the estate goal we have assumed that real estate holdings of Rs 75 lakh in present value terms will grow at a rate of 8 percent per annum to meet the estate goal in 2046
  23. 23. CASH FLOW MATCHING ANALYSIS In view of current economic conditions we recommend you maintain a six month emergency fund in Cash. In the next 12 months you have no significant liquidity requirements. Based on your projected expenses and commitments over the next 12 months we recommend maintaining a cash balance of Rs 23 lakh.
  24. 24. INSURANCE REQUIREMENTS
  25. 25. * Protection needed has been estimated by adjusting future goals, expenses at a 7% discount rate ** Please note that the Total Assets plus Life Insurance does not include value of residential home, jewelry and Insurance policies of other family members.
  26. 26. PROPOSED ASSET ALLOCATION
  27. 27. REVIEW & MONITORING Class Equity Debt Balanced Total Amount Invested 200000 400000 400000 100000 Amount In % 20% 40% 40% 100% Interest Earned 15% on 2000000 10% on 25% Nil Amount With Interest 230000 440000 500000 1170000 In% 20% 40% 40% 100% Current Amount 2340000 4680000 4680000 1170000 Asset Allocation -4000 -28000 +32000
  28. 28. STRESS TESTING

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