Professional Documents
Culture Documents
Strategies
https://www.youtube.com/watch?v=ElrDRUgOT3w
https://www.youtube.com/watch?v=8g8gPAqFxmM
Asset Allocation
Cash Stocks
An asset allocation is a strategy of
dividing the portfolio among various
asset classes so as to obtain the
desired portfolio characteristics to
suit distinct investor profiles.
Bonds, Stocks and Cash equivalents
are the most commonly used asset Bonds
classes in any asset allocation. It is an
organized and effective method of
diversification
Asset
Allocation
91.5%
10% 10%
5% R EAL ES TATE 5% R EAL ES TATE
C AS H C AS H
20%
B ONDS 55% B ONDS
30%
65% S TOC KS S TOC KS
13% 15%
25%
5% R EAL ES TATE R EAL ES TATE
44% C AS H 10% C AS H
B ONDS B ONDS
S TOC KS
38% S TOC KS
50%
Asset Allocation Principles
Risk and return are related
Risk depends on the length of time one holds the
investment
Rupee Cost Averaging can reduce the risks of
investing
Risks that an investor can take depends on the
investor’s capacity to take risks and his attitude to
take risks.
Rupee Cost Averaging can reduce the risks of
investing-buy less when price is high & more
when price is low.
1 Rs.150 Rs. 75 2
2 Rs.150 Rs.25 6
3 Rs.150 Rs.50 3
Total Cost Rs.450
Average Price Rs.50
Total Shares 11
owned
Weighted Average Cost: Rs. 40.91 ( 450 / 11)
Asset Allocation drivers
Asset allocation must take into account 2 factors:
Time horizon: the number of years you have to invest
Mo n th N AV S IP Un its
Mar-00 70.87 1000 14
Ap r-00 64.55 1000 30
An investor would have
May-00 56.79 1000 47
lost 26% if he made a one
J u n -00 56.28 1000 65
time investment in March’00
J u l-00 61.66 1000 81
as compared to the SIP loss
Au g -00 53.99 1000 100
S ep -00 58.72 1000 117
of 7.6%
Oct-00 51.63 1000 136
No v-00 49.72 1000 156
Dec-00 53.01 1000 175
J an -01 52.28 1000 194
https://www.youtube.com/watch?v=MkFttE1GuQc