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Sr. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Executive Summary Birla Sun life Company Profile Products Of Birla Sun Life Insurance Introduction To Portfolio Management Objective of portfolio Management Activities Of Portfolio Management Portfolio Manager Investment Alternatives Asset Allocation Importance of Diversification Analyzing Findings Recommendations/suggestion Conclusion Bibliography Contents Pg. No

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Portfolio Management Service:EX ECUTIVE SUMMARY

Introduction of Birla sun life Privilege Account Service:Birla Sun Life Privileged Account Services is a Portfolio Management Service for a select few. This highly personalized service is tailor made for High Net Worth investors seeking to achieve their financial goals. At Birla Sun Life Privileged Account Services our investment philosophy is designed to seek consistent, long-term results by adopting a research-based, methodical approach to investing. We aim at investment excellence within the framework of transparent and rigorous risk control. Birla Sun Life Asset Management Company - The power behind Privileged Account Services:Birla Sun Life Privileged Account Services is a division of Birla Sun Life Asset Management Company, investment managers for Birla Sun Life Mutual Fund. Launched in 1994, Birla Sun Life Asset Management Company is a Joint Venture between the Aditya Birla Group and Sun Life Financial Services of Canada. As one of India's leading mutual funds, managing over 42,000 Crore of assets for over 21 Lac investors (as of 31 Jan 2010), it has been a major force in the growth of the private sector mutual funds. Birla Sun Life Mutual Fund has proved its expertise in both equity & debt fund management. Its equity schemes have consistently
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beaten their benchmarks and created wealth in the long-term for investors. The Aditya Birla Group has one lakh employees in 25 countries and has a turnover of $ 28 billion, placing it among the Fortune 500. It has also been awarded as India's Best Employer. Sun Life Financial is a leading international financial services organization providing a full range of products and services to individuals and corporate customers.

Birla Sun Life Privileged Account Services - Exclusively for High Net-worth Individuals:Investing is difficult. More so is investing large amounts in uncertain times, especially when you are short of the time needed to work out the long-term investment strategy, implement the strategy and keep investments on course. That's where Birla Sun Life Privileged Account Services (PAS) steps in. This division of Birla Sun Life Asset Management Company is exclusively for select investors like you, offering you customized investment solutions built on (a) in-depth research (b) innovative products and services and (c) the highest levels of experience and expertise. After fully understanding your particular needs, your portfolio manager will put together the optimal portfolio for you, which takes into account your financial goals, time horizon, risk appetite and investment outlook. Using a research-based strategy, he will help you invest in strong businesses, with quality management and good records, yet trading at reasonable prices. Broadly, the portfolios can be categorized as: Growth nCASH Value High Dividend Yield Custom
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y y y y y

Growth Portfolio Here we concentrate on companies looking to grow by expanding in international markets, that is, their growth will mainly come from foreign markets.

Ideal if you want... Minimum investment amount Investment Horizon Approach

Higher returns at moderate volatility and risk Rs 25 lacs per individual account (or such other amount as decided by the Portfolio Manager at its sole discretion in each individual case) Minimum two to three years Invest in stocks of companies that can deliver products and services as good as the best in the world and are looking at growing through exports Reasonably higher growth in portfolio valuation Invests in growth oriented
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Key Benefits

companies Effective minimization of the portfolio risk

nCASH This is for investors who want to make the most of the market volatility by investing in good stocks whose valuation have been temporarily 'hammered' due to immediate circumstances. That is, the portfolio is built on the Contrary philosophy.

Ideal if you want... Minimum investment amount Investment Horizon Approach

Higher returns at moderate volatility and risk Rs 25 lacs per individual (or such other amount as decided by the Portfolio Manager at its sole discretion in each individual case) At least one year Invest in stocks available at attractive valuations (hammered) due to various factors but belonging to inherently good companies Strategically designed and diversified. Maximize returns for you from these opportunities
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Key Benefits

Access to innovative multi asset portfolio

Value Portfolio This product aims to offer the benefits of both value and growth investing. That is, it targets businesses priced less than they ought to be yet showing promise for high yields. It seeks to offer moderate to high capital appreciation and reasonable income in the form of dividends. Ideal if you want... Minimum investment amount Investment Horizon Approach Higher returns at moderate volatility and risk Rs. 25 lacs per individual account (or such other amount as decided by the Portfolio Manager at its sole discretion in each individual case) Minimum of one to three years Invest in stocks that are inexpensive in terms of valuation and yet offer high growth potential in terms of forword earnings Strategically designed and diversified Fairly high margin of safety of capital.
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Key Benefits

Access to innovative multi asset portfolio

High Dividend Yield Portfolio As the name suggests, this product aims for high to moderate income from dividends and reasonable capital appreciation. Hence, it targets stocks (a) trading for significantly less than their peers and the market as a whole and (b) offering high dividend yields.

Ideal if you want... Minimum investment amount Investment Horizon Approach

Moderate returns at low volatility and risk Rs 25 lacs per individual account (or such other amount as decided by the Portfolio Manager at its sole discretion in each individual case) Minimum of one to three years Invest in stocks of those companies which are inexpensive relative to the overall market, peers and historical standards and possess high quality managements, accelerating earnings and healthy
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balance sheets Key Benefits Invests in attractive dividend yield companies Higher revenue stream in the form of dividends Effective minimization of the portfolio risk.

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Custom Here the investor wants the portfolio to be perfectly tailored to his expectations and risk profile, and the Portfolio Manager has considerable flexibility. It is available only to the biggest investors. Ideal if you want... Minimum investment amount Investment Horizon Approach Key Benefits A tailor-made portfolio to meet your particular needs and preferences Rs 250 lacs per individual (or such other amount as decided by the Portfolio Manager at its sole discretion in each individual case) Minimum of one to three years Completely customized to investor's needs and orientations Flexibility to tailor your portfolio to meet your specific investment preference Total customization Higher level of portfolio reviews

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PORTFOLIO MANAGEMENT We all dream of beating the market and being super investors and spend an inordinate amount of time and resources in this endeavor. Consequently, we are easy prey for the magic bullets and the secret formulae offered by eager salespeople pushing their stuff. In spite of our best efforts, most of us fail in our attempts to be more than average investors. Nonetheless, we keep trying, hoping that we can be more like the investing legends another Warren Buffett or Peter Lynch. We read the words written by and about successful investors, hoping to find in them the key to their stock-picking abilities, so that we can replicate them and become wealthy quickly. Investing in shares and debentures is profitable as well as exiting. It is indeed rewarding, but involves a great deal of risk and calls for scientific knowledge and forecasting skill. In such investments, both rational as well as emotional responses are involved. Investing in securities is considered as one of the best avenues to invest ones savings while it is acknowledged to be one of the most risky avenues of investment. It is unusual to find investors investing their entire money in one single security. Instead, they tend to invest in a group of securities. Such a group of securities is called a portfolio. Creation of a portfolio helps to reduce risks without sacrificing returns. Portfolio management deals with the analysis of individual securities as well as with the theory and practice of optimally combining securities into portfolios. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success.
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An investor considering investment in securities is faced with the problem of choosing from among a large number of securities. His choice depends on the risk-return characteristics of individual securities. He would attempt to choose the most desirable securities and like to allocate his funds over this group of securities. Again he is faced with the problem of deciding which security to hold and how much to invest in each. The investor faces an innumerable number of possible portfolios or group of securities. The risk and return characteristics of portfolios differ from those of individual securities combining to form a portfolio. The investor tries to choose the optimal portfolio taking into consideration the risk return characteristics of all possible portfolios. As the economic and financial environment keeps changing the risk and return characteristics of individual securities as well as portfolios also change. This calls for periodic review of and revision of investment portfolios of investors. An investor invests his funds in a portfolio expecting to get good return consistent with the risks that he has to bear. The return realized from the portfolio has to be measured and the performance of the portfolio has to be evaluated. It is evident that rational investment activity involves creation of an investment portfolio. Portfolio management comprises all the processes involved in the creation and maintenance of an investment portfolio. It deals specifically with security analysis, portfolio analysis, portfolio selection, portfolio revision and portfolio evaluation. Portfolio management makes use of analytical techniques of
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analysis and conceptual theories regarding rational allocation of funds. Portfolio management is a complex process, which tries to make investment activity more rewarding and less risky.


Security/Safety of Principal:Security not only involves keeping the

principal sum intact but also keeping intact its purchasing power.

y Stability of Income: Stability of income so as to facilitate planning more

accurately and systematically the reinvestment or consumption of income. y

Capital Growth:Capital growth which can be attained by reinvesting in

growth securities or through purchase of growth securities.

Marketability:The case with which a security can be bought or sold. This

is essential for providing flexibility to investment portfolio.

y Liquidity:Liquidity i.e. nearness to money. It is desirable for the investor

so as to take advantage of attractive opportunities upcoming in the market. y

Diversification:The basic objective of building a portfolio is to reduce

the risk of loss of capital and income by investing in various types of securities and over a wide range of industries.

Favorable Tax Status: The effective yield an investor gets from his
investment depends on tax to which it is subject. By minimizing the tax burden, yield can be effectively improved.

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ACTIVITIES IN PORTFOLIO MANAGEMENT The following three major activities are involved in an efficient portfolio management:
a) Identification of assets or securities, Allocation of investments and identifying asset classes. b) Deciding about major weights/proportion of different assets/securities in the portfolio.

c) Security selection within the asset classes as identified earlier.

The above activities are directed to achieve the sole purpose to maximize return and minimize risk in the investments. This will however be depending upon the class of assets chosen for investment.

The foregoing table gives a birds view of various parameters attached with different classes of assets / securities return wise.
Class Type Security of Period of Return Maturity Shape Certaint Tax y of Structure Return Risk

1. Fixed (a) Bonds / income Debentures class - Govt. Bonds Long -Local Long Authority Bonds Public Long Sector Bonds (b) Corporate Long Debentures Preference Stock -Redeemable Long

Interest Coupon -Do-

Definite -Do-

Tax Relief -Do-

No No








Mediu m




Mediu m

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- Non Redeemable





Mediu m

2) Non - Equity Specific Income

Perpetua l

3) Cash Treasury Short equivale Bills nt -Commercial Papers

Dividends Least and Capital Gains Discount High

Tax Relief




Thus, from the Table we can notice that the degree of risk varies according to the class of assets / securities etc. It is also well known that the portfolio manager envisages balancing the risk and return in a portfolio investment. With higher risk, higher returns may be expected and vice-versa. The class of assets/securities varies according to the degree of risk. It is well interpreted that higher the risk, higher will be the returns and vice versa. The portfolio manager foresees the balancing of risk and return in a portfolio investment.

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In view of peculiar nature of stock exchange operations most of the investors feel insecure in managing their investment on the stock market because it is difficult for an individual to identify companies which have growth prospects conducive for investment. This is further complicated by the volatile nature of the markets, which demands constant reshuffling of portfolios to capitalize on the growth opportunities. Even if the investor is able to identify growth oriented companies and their securities, the trading practices are complicated, making it a difficult task for investors to trade in all the exchanges and follow-up on post trading formalities. That is why professional investment advice through Portfolio Management Services (PMS) can help the investor to make an intelligent and informed choice between alternative investment opportunities without the worry of post trading hassles. In India, as well as in a number of western countries, portfolio management service has assumed the role of a specialized service now a days and a number of professional merchant bankers compete aggressively to provide the best of high net-worth clients, who have little time to manage their investments. The idea is catching on with the boom in the capital market and an increasing number of people are inclined to make profits out of their hard earned savings. Portfolio management service is one of the merchant banking .

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DEFINITION OF PORTFOLIO / PORTFOLIO MANAGER: Portfolio means the total holdings of securities belonging to any person. Portfolio manager means any person who enters into a contract or agreement with a client. Pursuant to such agreements he advices the clients or undertakes on behalf of such client management or administration of a portfolio of securities or invests and manages the clients funds.

Two Types of Portfolio Managers

Discretionary Portfolio Manager

Non- Discretionary Portfolio Manager

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Discretionary Portfolio Manager:

A discretionary portfolio manager meansa portfolio manager who exercises or may, under a contract relating to portfolio management, exercises any degree of discretion in respect of the investments or management of the portfolio of securities or the funds of the clients, as the case may be. He shall individually and independently manage the funds of each client in accordance with the needs of the client in a manner which does not resemble a mutual fund.

Non-Discretionary Portfolio Manager:

A Non-Discretionary Portfolio Manager shall manage the funds of each client in accordance with the directions of the client. A portfolio manager, by the virtue of his knowledge, background and experience is expected to study the various avenues available for profitable investment and advise his client to enable the latter to maximize the return on his investment and at the same time safeguard the funds invested.

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The income that a person receives may be used for purchasing goods and services that he currently requires or it may be saves for purchasing goods and services that he may require in the future. In other words, income can be what is spent for current consumption or saved for the future consumption. Savings are generated when a person or an organization abstains from present consumption for future use. The person saving a part of his income tries to find a temporary repository for his savings until they are required to finance his future expenditure this results in investments.

Investment is an activity that is engaged in by people who have savings, i.e. investments are made from savings, or in other words, people invest their savings. But all savers are not investors. Investment is an activity, which is different from saving. It may mean many things to many persons. If one person has advanced some money to another, he may consider his loan as an investment. He expects to get back the money along with interest at a future date. Another person may have purchased one kg of gold for the purpose of price appreciation and may consider it as an investment. Yet another person may purchase an insurance plan for the various benefits it promises in the future. That is his investment. In all these cases it can be seen that investment involves employment of funds with the aim of achieving additional income or growth in values. The essential quality of investment is that it involves waiting for a

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reward. Investment involves the commitment of resources, which have been saved in the hope that some benefits will accrue in the future. Thus investment may be defined as a commitment of funds made in the expectation of some positive rate of return. Expectation of return is an essential element of investment. Since the return is expected to be realized in future, there is a possibility that the return actually realized is lower than the return expected to be realized. This possibility of variation in the actual return is known as investment risk. Thus every investment involves return and risk.

An investor has various alternative avenues of investment for his savings to flow to. Savings kept, as cash are barren and earn nothing. Hence savings are invested in assets depending on their risk and return characteristics. The objective of the investor is to minimize the risk and maximize the return on his investment. Our savings kept in cash are not only barren because they do not earn anything, but also loses its value to the extent of rise in prices. Thus rise in prices or inflation erodes the value of money. Savings are invested to provide a hedge or protection against inflation. If the investments cannot earn as much as the rise in prices, the real rate of return would be negative. Thus, if inflation is at an average rate of 10%, then the return from the investments made should be more than 10% to induce savings to flow into investments. Thus the objectives of an investor can be stated as follows: a. Maximization of return. b. Minimization of risk. c. Hedge against inflation. Investors, in general, desire to earn as large returns as possible with the minimum of risk. Risk here may be understood as the probability that actual returns realized from an investment would be different from the expected returns. The financial assets available for investment can be classified into the following categories: Page 19

a. Government securities risk free. b. Debentures and preference shares medium risk assets. c. Equity shares high-risk assets. An investor would be prepared to assume higher risk only if he expects to get proportionately higher returns. There is a trade-off between the risk and return. The expected return of an investment is directly proportional to its risk. Thus in the financial markets, there are various assets with varying riskreturn characteristics.

Investment alternatives are the outlets of funds. There are varieties of investment alternatives available. Investors are free to select any one or more alternatives depending upon their needs. All categories of investors are equally interested in safety, liquidity and reasonable return on the funds invested by them. In India, investment alternatives are continuously increasing along with new developments in the financial market. Investment is now possible in corporate securities, public provident fund, mutual fund etc. Thus, wide varieties of investment alternatives are now available to the investors. However, the investors should be very careful about their hard earned money. An investor can select the best one after studying the merits and demerits of the available alternatives.

Non Marketable Financial Assets: A good portion of financial assets is

represented by non- marketable financial assts. These can be classified into the following broad categories: y y y y Bank Deposits Post office Deposits Company Deposits Provident Fund Deposits Page 20

Equity Shares:
Equity shares represent ownership capital. As an equity shareholder, you have an ownership stake in the company. This essentially means that you have a residual interest in income and wealth. Perhaps the most romantic among various investment alternatives, equity shares are classified into the following broad categories by stock market analysts:

y y y y y

Blue Chip Shares Growth Shares Income Shares Cyclical Shares Speculative Shares

Bonds or debentures represent long-term debt instruments. The issuer of a bond promises to pay a stipulated stream of cash flow. Bonds may be classified into the following categories: y y y y y y Government Securities Savings Bonds Government Agency Securities PSU Bonds Debentures of Private Sector Companies Preference Shares

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Money market Instruments:

Debt instruments which have a maturity of less than one year at the time of issue are called money market instruments. The important money market instruments are: y y y Treasury Bills Commercial Paper Certificate of Deposit

Mutual Funds:Instead of directly buying equity shares and/or fixed income

instruments, you can participate in various schemes floated by mutual funds which, in turn, invest in equity shares and fixed income securities. There are three broad types of mutual fund schemes: y y y Equity Schemes Debt Schemes Balanced Schemes

Life Insurance: In a broad sense, life insurance may be viewed as an

investment. Insurance premiums represent the sacrifice, and the assured sum, the benefit. The important types of insurance policies in India are: y y y Endowment Assurance Policy Money Back Policy Whole Life Policy

y Term Assurance Policy

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Real Estate:For the bulk of the investors the most important asset in their
portfolio is a residential house. In addition to a residential house, the more affluent investors are likely to be interested in the following types of real estates: y y y Agriculture Land Semi-Urban Land Commercial Property

Precious Objects: Precious objects are items that are generally small in size
but highly valuable in monetary terms. Some important precious objects are: y y y Gold and Silver Precious Stones Art Objects

Financial Derivatives: A financial derivative is an instrument whose value is

derived from the value of an underlying asset. The most important financial derivatives from the point of view of investors are: y y Options Futures

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PORTFOLIO SELECTION:The objective of every investor is to maximize his returns and minimize his risk. Diversification is the method adopted to reduce the risk. It essentially results in the construction of portfolios. The proper goal of construction of portfolios would be to generate a portfolio that provides the highest return and lowest risk. Such a portfolio would be an optimal portfolio. The process of finding the optimal portfolio is described as portfolio selection. The conceptual framework and analytical tools for determining the optimal portfolio in disciplined and objective manner have been provided by Harry Markowitz in his pioneering work on portfolio analysis described in his 1952 JOURNAL OF FINANCE article and subsequent book in 1959. His method of portfolio selection is come to be known asMarkowitzmodel. In fact, Markowitz work marked the beginning of what is today the Modern Portfolio Theory.

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Portfolios Building Approach:-

Risk profile investment object existing portfolio

U nderstanding financial g ls oa

Portfolio review

Inve ent stm plans

Reviewinvt, objs, portfolioprogress, assetallocation and portfoliostrategy

Portfolio m ntenance ai

Adisciplined portfoliobuilding approach

Asset allocation Cashflow planning Rebalance existing portfolio

Portfolio construction

Execution of debt, equity and Otherinvestm ent T actical rebalancing M aintainasset allocation

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What is Asset Allocation?

Analyst and other experts invariably spout jargon. Terms like

valuation, diversification, and asset allocation are thrown at us from every angle. Little wonder that investors are invariably confused. But not all these things are as incredibly complex as they sound. One such term we often hear is asset allocation. Though it appears intimidating, in actual fact, the meaning is quite straightforward. Its a kind of insurance or protection, should one of your investments go bad. If the stock market crashes, your non-stock holdings can help bail you out. Or if real estate plunges, you will thank God for your PPF account. In actual fact, whether you realize it or not, you are already allocating your assets as most of us have our wealth divided into different assets gold, real estate, stocks, bank account, etc. The question is whether you are doing so consciously and strategically, or simply in a random or haphazard manner. The two phrases, asset allocation and diversification are often used interchangeably. But not many know that there is a subtle difference between the two terms. This is because they have similar objectives: To minimize risk and provide exposure to differing growth opportunities within an investment portfolio.By doing this, you can help prevent losing it all on one poor choice-just as all your eggs would break if your dropped the basket. A diversified portfolio help protect against large losses because, typically, if some securities crash, other may perform well.

Asset allocation is similar to diversification, but involves some amount of strategy. The cornerstone of this is allocation of assets over different asset classes. In a diversified stock portfolio, we not only have a stock portfolio, but a bond portfolio, a cash equivalent portfolio, and maybe some other types of assets as well. The combination of multiple asset classes offers the growth

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potential of stocks, combined with regular income and relative stability of bonds and the liquidity and security of cash. Most of us spend sleepless nights trying to figure out which stocks to buy or sell, or whether to own mutual funds or derivatives. These are no doubt real concerns, but much of the tension could be minimized by some prior planning. And it is this planning that is called asset allocation.

Asset allocation is actually a relatively new concept. Till about twenty or thirty years ago, it was believed that specific stock selection, or market timing, or timing the decision to move from stocks to bonds were the most important determinants of investment success. But today, though most of us still try to live on timing and selection of individual securities, he investment professionals have come to recognize the importance of asset allocation.

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Importance of diversification that Biral Sun Life has taken care of.
Diversification helps you protect your investments from market fluctuations. Diversifying means allocating your money to different investments avenues and shields you from price risks. As you pick the best stocks from the hottest sectors, the fluctuation risk of the stock eroding your investment rises correspondingly. Since some stocks in the IT and media sectors are highly volatile, you need to protect your portfolio by investing in some defensive stocks or other industry groups. It would also be wise to diversify your investments into bonds or FDs as these are low risk - fixed income avenues. The primary objectives of any Portfolio management are Security of principal amount invested Stability of income Capital growth Liquidity nearness to money to take up any new buy opportunities thrown open by the market Diversification Diversifying means buying stocks belonging to different industries with very low correlation i.e to find securities that do not have tendencies to increase or decrease in price at the same time. What you're working towards should be at least five industries for the stock portion of the portfolio with each stock being the best stock, in your opinion, in their respective industry group. There should still be money invested in a money market fund (the equivalent of cash) as well as some in fixed income. On the flip side, a diversified portfolio is unlikely to outperform the market by a big margin for exactly the same reason.

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Portfolio Age relationship.

Your age will help you determine what is a good mix / portfolio is

Age 80% below 30 10% 10% 70% 30 t0 40 10% 20% 60% 40 to 50 10% 30% 50% 50 to 60 10% 40% 40% above 60 10% 50%

Portfolio in stocks or mutual in cash in fixed income in stocks or mutual in cash in fixed income in stocks or mutual in cash in fixed income in stocks or mutual in cash in fixed income in stocks or mutual in cash in fixed income






These aren't hard and fast allocations, just guidelines to get you thinking about how your portfolio should look. Your risk profile will give you more equities or more fixed income depending on your aggressive or conservative bias. However, it's important to always have some equities in your portfolio (or equity funds) no matter what your age. If inflation roars back, this will be the portion of your investments that protects you from the damage, not your fixed income. Also, the fixed income of your portfolio should be diversified. If you buy bonds and debentures directly or if you invest in FDs, then make sure you have at least five different maturities to spread out the interest rate risk. Diversifying in equities and bonds means more than buying a number of positions. Each position needs to be scrutinized as to how it fits into the stocks or bonds that already are in your portfolio, and how they might be affected by the same event such as higher interest rates, lower fuel prices, etc. Put your portfolio together like a puzzle, adding a piece at a time, each one a little different from the other but achieving a uniform whole once the portfolio is Page 30


Look at your portfolio and do some adjustments. But don't just sell the losers (or the winners) randomly. There are several consequences of any action whether it's the taxes, the asset allocation, or the timing of the transaction. Here are a few things to consider. If you liked a stock because of its earnings and it continues to deliver, hang on even if the price has not moved up. It will because earnings are the engine of any stock's price. As always, patience is heavily rewarded in the market because it is the rarest commodity. As for selling a stock and then thinking you can buy it back after some days. There are two problems with that type of thinking. One, you generate two rounds of commissions (sell, then buy) and two, you may not get to buy the stock back at a decent price because the stock might have run dramatically in the month you did not own it. If you sell a stock, do it with finality and move on. Don't try to time the market. No one can do that with perfection. Another aspect: look at your portfolio allocation. Are you tech heavy? At the moment that's the place to be. But that changes, quickly as we had seen in the month of May 2010. Put your portfolio in shape by allocating your investments evenly over at least five different industry groups and 10 stocks. That way you won't feel the full impact of any one sector getting hit hard.

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Different Asset Classes Risk v/s Returns

We know asset allocation and present a (hopefully, convincing) case for using this technique. We also spoke loosely about asset classes. Essentially, the allocation process needs to first categorize different assets into broad classes with similar characteristics. In the investment world, there are two parameters that are of paramount importance. The first is the return that one gets from a particular investment, and the second is the risk that one takes to achieve that return. Also, it is known that there is a direct relationship between the two. Typically, the greater the returns, the greater the risk. It is very difficult to foresee the future risks or returns that a particular investment will have, so we tend to use historical data for classification purposes.

Conservative investments, such as cash or bank accounts offer minimal risk, and essentially seek to preserve existing capital and offer minimal risk. Moderate-risk investments include highly debt instruments (such as company fixed deposits or bonds issued by corporate) as well as bonds with shorter maturities. Stocks typically offer greater growth possibilities-as well as greater risk potential. But it is not simple. Within each of these individual asset classes lie further segments, such as value and growth stocks, corporate and government bonds, bank deposits and PPF. There are also other assets like gold or real estate that may not fit into the three commonly accepted categories. Also, certain types of assets like cyclical stocks are often treated as separate assets classes because they have different historical performance characteristics from other stocks.

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While talking of real estate, though these investments have been very popular in the Indian context, their lack of liquidity and high unit value makes them intrinsically unsuitable as investments for most of us. For the purpose of this discussion, we will restrict ourselves to the three basic asset classes comprised of financial securities. Once the basic principles are understood, an investor can choose to define further classes as per his needs and perceptions.

A Profile of the Three Basic Asset Classes each of these three-asset classes offers measurably different tradeoffs between risk and return, and each benefits your portfolio in a different way.

Cash Equivalents:money market funds, Treasury Bills, bank deposits,

post office savings and the like provide for low risk, and the preservation of principal but generally do not provide returns high enough to outpace inflation.

Bonds (fixed-income investment):represent loans to a business or

government, provide for preservation of principal and a fixed rate of return when held to maturity. While most bonds generate current income, they Page 33

offer limited potential for increasing returns. Examples of these in India are company fixed deposits, ICICI bonds and the like.

Stocks (equities):represent shares (or part ownership) of a company.

While stocks can and do experience significant volatility, historically, they have provided the best record of long term growth of principal.

We have compiled a broad comparison of the risk versus return equation for various investment opportunities for the Indian investor, in the table below:Risk-Return Comparison of various Investment Avenues
Type of Investment Level Cash equivalents Liquid Funds (money market mutual funds) Bank Fixed Deposits 7-8% 7-10% Low Low Historical Returns Risk

Post Office, NSC (Govt.) Govt. Securities PF/PPF/Pension Bonds Company FD

10-12% 8.5-12% 11-12%

Low Low Low



Bonds Income Mutual Funds Equity Equity Mutual Funds Equities

10-15% 10-14% Low

18-22% 18-22%

High High

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Portfolio As on 31st June 2011

SECURITIES GOVERNMENT SECURITIES 6.9% Govt Of India 2015 6.35% Govt Of India 2012 7.95% Govt Of India 2015 7.94% Govt Of India 2013 8.52% Govt Of India 2011 7.44% Govt Of India 2014 7.61% Govt Of India 2016 6.07% Govt Of India 2013 7.94% Govt Of India 2016 6.9% Govt Of India 2015 Other Govt Securities HOLDINGS 15.98 4.87 2.18 1.35 0.92 0.91 0.63 0.57 0.55 0.50 0.45 3.05

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OBSERVATION AND FINDING:More than 75% Investors are investing their money for Liquidity, Return and Taxbenefits.

As among all Investment Option for Investor the most important area to get more returnis share around 22%after that Mutual Fund and other comes into existence. More than 76% of Investors feels that PMS is less risky than investing money in MutualFunds.

As the experience from the Market more than 34% Investor had lose their money duringthe concerned year, whereas 20% respondents have got satisfied return Investors preferred more than 45% equity Portfolio, 28%Balanceed Portfolio and about 27% Debt Portfolio. About 52% Respondents earned through Birla PMS product, whereas 18% investor faced loses also.

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Recommendation / Suggestion:The company should also organize seminars and similar activities to enhance theknowledge of prospective and existing customers, so that they feel more comfortablewhile investing in the stock market. Investors must feel safe about their money invested. Investors accounts must be more transparent as compared to other companies. Birla Sun life Insurance must try to promote more its Portfolio Management Services throughAdvertisements. Birla Sun Life Insurance needs to improve more its Customer Services. There is needed to change in lock in period of all the five type of investments.

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