Asset Allocation

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Asset Allocation

• Portfolio Management

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What is Asset Allocation (AA)?

• Asset allocation is the practice of diversifying
  the portfolio between different asset classes and
  / or products.
• Each asset class reflects peculiar
  characteristics, risk-return profile not being
  shared by others.
• Asset allocation can be decided to
• Achieve some objective
• Match investors profile

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Asset Allocation idea/ need

• The performance of assets may vary from year to
  year and is not easily predictable.
• Mixture of assets is more likely to meet the
  goals.
• Fundamental idea different asset classes
  offering non-correlated returns (or inversely
  correlated) can be pooled together in a portfolio
  for diversification
• Good Asset Allocation would reduce risks and
  variability of expected returns.
• Asset Allocation becomes ineffective if done
  within similar or correlated asset classes.

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How to decide Asset Allocation?

• Asset Allocation depends upon the return that an
  investor is looking at.
• If your Investor is targeting a return of 10
  what you will Suggest? I will suggest him an
  Asset Allocation

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Asset Allocation Benefits

• Asset allocation is the primary/ main determinant
  of long-term portfolio performance rather than
  superior product selection or market timing

Asset allocation is a key factor in determining
the success of an investment strategy. According
to a widely recognized financial study by
Brinson, Singer Beebower, published in the
Financial Analyst's Journal in 1995, asset
allocation can account for up to 93.6 of
portfolio performance.
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Focus on Asset Allocation
Asset Allocation
Impact on Return in Long Term
Size Timing
Sector Selection
Stock Selection
Style Timing
Market Timing
Probability of Success
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Asset Classes
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Asset Allocation gt Risk Profile
Asset Allocation as per Profile Asset Allocation as per Profile Asset Allocation as per Profile Asset Allocation as per Profile
  Equity Debt Cash
Aggressive 75 20 5
Moderate 55 40 5
Cautious 35 60 5
Conservative 20 75 5
For Illustrative purpose only.