The document is a portfolio management report submitted by a group of students to their professor. It includes: 1) An introduction to the need for financial planning and goal setting. 2) Examples of asset allocation strategies for conservative, moderate, and aggressive investors. 3) A discussion of different asset classes for investment. 4) Three examples of investor profiles with proposed asset allocations.

1. •
•
•
•
Class: T.Y.BFM
Subject: Portfolio Management
Semester: V
Date: 28/06/2012
Submitted to:
Prof. Hema Manwani

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. Portfolio Management
Planning & Goal Setting
Planning for Your Future!

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. 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. Need Of Portfolio Managers
• Understands clients
needs
• Diversify risk and
return
• Skilled and
knowledgable
person

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. 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. 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.

11. Financial Planning and Asset Allocation
Asset Classes to Invest
Gold
Art
Debt
Mutual Funds
Financial
Planning
Insurance
Commodities
Equity
Real Estate

12. 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

13. Financial Planning and Asset Allocation
FEW EXAMPLES OF
ASSET ALLOCATIONS

14. 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%

15. 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%

16. 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%

17. 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%

19. 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

20. CURRENT ASSET ALLOCATION

21. 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)

22. PERSONAL INFORMATION

24. •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.

25. 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

27. 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.

28. INSURANCE REQUIREMENTS

29. * 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.

30. PROPOSED ASSET ALLOCATION

31. 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

32. STRESS TESTING