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Dr. Ankit Jain 1
 A risk profile is an evaluation of an individual
willingness and ability to take risks.
 A risk profile is important for determining a proper
investment asset allocation for a portfolio.
 Risk Profiling is an approach to understand the risk
appetite of investors.
Dr. Ankit Jain 2
 Some AMCs and securities research houses provide
risk profiling tools in their website.
Dr. Ankit Jain 3
Dr. Ankit Jain 4
Dr. Ankit Jain 5
Dr. Ankit Jain 6
 Allocating the available resources between asset class
within the appropriate risk and return framework.
 Asset allocation is driven completely by his need for
return and risk profile.
 It is for long term.
Dr. Ankit Jain 7
 It is the decision that comes out of calls on the likely
behaviour of the market.
 Tactical asset allocation is suitable only for seasoned
investors operating with large investible surpluses.
 It is risky.
Dr. Ankit Jain 8
 Fixed Asset Allocation
 Flexible Asset Allocation
Dr. Ankit Jain 9
MF
Schemes
Low Risk
Funds
Moderate
Risk Funds
High Risk
Funds
Dr. Ankit Jain 10
 This funds are suggested to the investors whose risk
appetite is very low.
 The low risk fund comprise of Money Market Mutual
Fund and Government Securities Fund.
Dr. Ankit Jain 11
 This funds are suggested to the investors whose risk
appetite is moderate.
 The moderate risk fund comprise of following below
mentioned mutual fund schemes.
1. Income Funds
2. Balanced Funds
3. Growth and Income Funds
4. Growth Funds
5. Short term bond Funds
6. Intermediate bond Funds
7. Index Funds
Dr. Ankit Jain 12
 This funds are suggested to the investors whose risk
appetite is very high.
 The high risk fund comprise of below mentioned
mutual fund schemes.
1. Aggressive Growth Fund
2. International Funds
3. Sector Funds
4. Gold Funds
5. High Yield Bond Funds
Dr. Ankit Jain 13
Based on the risk level of the different fund categories,
Jacob recommends the following portfolio sub allocations
within each category. They are
1. Low Risk (Conservative) Portfolio
2. Moderate Risk (Cautiously Aggressive) Portfolio
3. High Risk (Aggressive) Portfolio
Dr. Ankit Jain 14
Low Risk
(Conservative)
Portfolio
50%
Government
Securities Funds
50%
Money Market
Funds
Dr. Ankit Jain 15
Moderate Risk
(Cautiously Aggressive)
Portfolio
40%
Growth and
Income Funds
30%
Government
Bond Funds
20%
Growth Funds
10%
Index Funds
Dr. Ankit Jain 16
Dr. Ankit Jain 17
25%
Aggressive
Growth Funds
25%
International
Funds
25%
Sector Funds
15%
High Yield Bond
Funds
10%
Gold Funds
The portfolio must be constructed keeping in mind the following
phases of the life cycle of an investor.
1. Young, Unmarried Professional
2. Young Couple with Two Incomes and Two Children
3. Older Couple, Single Income
4. Recently Retired Couple
Dr. Ankit Jain 18
Investor
Young, Unmarried
Professional
Recommended Model
Portfolio
1. 50% in diversified Equity
Funds
2. 20% in sector funds
3. 10% in Gold ETF
4. 10% in diversified debt
5. 10% in Liquid Funds
Dr. Ankit Jain 19
Investor
Young Couple single
Incomes members and
Two Children
Recommended Model Portfolio
1. 35% in diversified in Equity
Schemes.
2. 10% in Sector Funds
3. 15% in Gold ETF
4. 30% in diversified debt Funds
5. 10% in liquid schemes
Dr. Ankit Jain 20
Investor
Single income
family with grown
up children who are
yet to settle down
Recommended Model Portfolio
1. 35% in diversified in equity
schemes
2. 10% in Index Funds
3. 15% in Gold ETF Funds
4. 30% in diversified debt fund
5. 10% in Liquid Schemes
Dr. Ankit Jain 21
Investor
Couple in their
seventies, with no family
support
Recommended Model Portfolio
1. 15% in diversified in Equity
Funds
2. 10% in Gold ETF
3. 30% in diversified in debt Funds
4. 30% in MIP
5. 15% in liquid schemes
Dr. Ankit Jain 22
Basic Managed
Portfolio
1. 50% in Diversified Equity Value
Funds
2. 25% in Government Securities
Fund
3. 25% in High Grade Corporate
Bond Funds
Dr. Ankit Jain 23
Basic Indexed
Portfolio
1. 50% in Total Stock Market
Index Fund
2. 50% in Total Bond Market
Portfolio
Dr. Ankit Jain 24
Simple Managed
Portfolio
1. 85% in Balanced 60/40 Fund
2. 15% in Medium term Bond
Fund
Dr. Ankit Jain 25
Complex Managed
Portfolio
1. 20% in diversified equity funds
2. 20% in aggressive growth funds
3. 10% in speciality funds
4. 30% in long term bond funds
5. 20% in short term bond funds
Dr. Ankit Jain 26
Ready Made
Portfolio
Single Index Fund with
60% Equity Holdings
+
40% Bond Holdings
Dr. Ankit Jain 27
 Review the performance at certain period of time.
 Rebalancing is in Fixed or strategy asset allocation.
Dr. Ankit Jain 28
While investing in equity funds, a principle to
internalize is that markets are more predictable in the
long term, than in the short term.
So, it is better to consider equity funds, when the
investment horizon is adequately long.
Dr. Ankit Jain 29
It can be risky to invest in mid-cap / small cap funds during
periods of economic turmoil.
As the economy recovers, and investors start investing in the
market, the valuations in front-line stocks turn expensive. At this
stage, the mid-cap / small cap funds offer attractive investment
opportunities.
Over longer periods, some of the mid/small cap companies have
the potential to become large-cap companies thus rewarding
investors.
Dr. Ankit Jain 30

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Chapter 12 mutual fund

  • 2.  A risk profile is an evaluation of an individual willingness and ability to take risks.  A risk profile is important for determining a proper investment asset allocation for a portfolio.  Risk Profiling is an approach to understand the risk appetite of investors. Dr. Ankit Jain 2
  • 3.  Some AMCs and securities research houses provide risk profiling tools in their website. Dr. Ankit Jain 3
  • 7.  Allocating the available resources between asset class within the appropriate risk and return framework.  Asset allocation is driven completely by his need for return and risk profile.  It is for long term. Dr. Ankit Jain 7
  • 8.  It is the decision that comes out of calls on the likely behaviour of the market.  Tactical asset allocation is suitable only for seasoned investors operating with large investible surpluses.  It is risky. Dr. Ankit Jain 8
  • 9.  Fixed Asset Allocation  Flexible Asset Allocation Dr. Ankit Jain 9
  • 11.  This funds are suggested to the investors whose risk appetite is very low.  The low risk fund comprise of Money Market Mutual Fund and Government Securities Fund. Dr. Ankit Jain 11
  • 12.  This funds are suggested to the investors whose risk appetite is moderate.  The moderate risk fund comprise of following below mentioned mutual fund schemes. 1. Income Funds 2. Balanced Funds 3. Growth and Income Funds 4. Growth Funds 5. Short term bond Funds 6. Intermediate bond Funds 7. Index Funds Dr. Ankit Jain 12
  • 13.  This funds are suggested to the investors whose risk appetite is very high.  The high risk fund comprise of below mentioned mutual fund schemes. 1. Aggressive Growth Fund 2. International Funds 3. Sector Funds 4. Gold Funds 5. High Yield Bond Funds Dr. Ankit Jain 13
  • 14. Based on the risk level of the different fund categories, Jacob recommends the following portfolio sub allocations within each category. They are 1. Low Risk (Conservative) Portfolio 2. Moderate Risk (Cautiously Aggressive) Portfolio 3. High Risk (Aggressive) Portfolio Dr. Ankit Jain 14
  • 16. Moderate Risk (Cautiously Aggressive) Portfolio 40% Growth and Income Funds 30% Government Bond Funds 20% Growth Funds 10% Index Funds Dr. Ankit Jain 16
  • 17. Dr. Ankit Jain 17 25% Aggressive Growth Funds 25% International Funds 25% Sector Funds 15% High Yield Bond Funds 10% Gold Funds
  • 18. The portfolio must be constructed keeping in mind the following phases of the life cycle of an investor. 1. Young, Unmarried Professional 2. Young Couple with Two Incomes and Two Children 3. Older Couple, Single Income 4. Recently Retired Couple Dr. Ankit Jain 18
  • 19. Investor Young, Unmarried Professional Recommended Model Portfolio 1. 50% in diversified Equity Funds 2. 20% in sector funds 3. 10% in Gold ETF 4. 10% in diversified debt 5. 10% in Liquid Funds Dr. Ankit Jain 19
  • 20. Investor Young Couple single Incomes members and Two Children Recommended Model Portfolio 1. 35% in diversified in Equity Schemes. 2. 10% in Sector Funds 3. 15% in Gold ETF 4. 30% in diversified debt Funds 5. 10% in liquid schemes Dr. Ankit Jain 20
  • 21. Investor Single income family with grown up children who are yet to settle down Recommended Model Portfolio 1. 35% in diversified in equity schemes 2. 10% in Index Funds 3. 15% in Gold ETF Funds 4. 30% in diversified debt fund 5. 10% in Liquid Schemes Dr. Ankit Jain 21
  • 22. Investor Couple in their seventies, with no family support Recommended Model Portfolio 1. 15% in diversified in Equity Funds 2. 10% in Gold ETF 3. 30% in diversified in debt Funds 4. 30% in MIP 5. 15% in liquid schemes Dr. Ankit Jain 22
  • 23. Basic Managed Portfolio 1. 50% in Diversified Equity Value Funds 2. 25% in Government Securities Fund 3. 25% in High Grade Corporate Bond Funds Dr. Ankit Jain 23
  • 24. Basic Indexed Portfolio 1. 50% in Total Stock Market Index Fund 2. 50% in Total Bond Market Portfolio Dr. Ankit Jain 24
  • 25. Simple Managed Portfolio 1. 85% in Balanced 60/40 Fund 2. 15% in Medium term Bond Fund Dr. Ankit Jain 25
  • 26. Complex Managed Portfolio 1. 20% in diversified equity funds 2. 20% in aggressive growth funds 3. 10% in speciality funds 4. 30% in long term bond funds 5. 20% in short term bond funds Dr. Ankit Jain 26
  • 27. Ready Made Portfolio Single Index Fund with 60% Equity Holdings + 40% Bond Holdings Dr. Ankit Jain 27
  • 28.  Review the performance at certain period of time.  Rebalancing is in Fixed or strategy asset allocation. Dr. Ankit Jain 28
  • 29. While investing in equity funds, a principle to internalize is that markets are more predictable in the long term, than in the short term. So, it is better to consider equity funds, when the investment horizon is adequately long. Dr. Ankit Jain 29
  • 30. It can be risky to invest in mid-cap / small cap funds during periods of economic turmoil. As the economy recovers, and investors start investing in the market, the valuations in front-line stocks turn expensive. At this stage, the mid-cap / small cap funds offer attractive investment opportunities. Over longer periods, some of the mid/small cap companies have the potential to become large-cap companies thus rewarding investors. Dr. Ankit Jain 30