Asset Classes and Market Segments
- 1. ASSET CLASSES AND MARKET SEGMENTS Presentors:- Arushi Gupta Divya Malik Prabhjot Singh Robin Gupta Sachin Sharma
- 2. Asset Classes The process of allocating money between equity stocks and fixed income securities such as, bonds, and fixed deposits It’s a portfolio building It’s a process of optimisation of the return and risk of the investor Diversifying the money among different types of investment categories
- 3. Different Asset Classes Equity (Stocks) Fixed Income Real Estate (Bonds) Asset Classes Cash and Commodities Cash Equivalents
- 4. “A GOOD INVESTOR DOES NOT PUT ALL HIS EGGS IN ONE BASKET”
- 5. Asset Allocation An investment strategy that attempts to balance risk versus reward by adjusting the percentage of each in an investment portfolio according to the investors risk tolerance, goals and investment time frame
- 6. Why Resort to Asset Allocation? To diversify the risk Since one does not know before hand what economic situation would be tomorrow
- 7. How To Do? Divide the investment between high and low risk and minimise the risk Based on long term and short term goals Before making investment make sure level of return, risk, liquidity, transaction cost
- 8. Three important factors for allocation of assets:- Risk tolerance Investment objectives Time horizon
- 9. State in Life A younger person, having a safe livelihood and few dependents, can take more risk while choosing his portfolio If he does not need money for 25 years and is comfortable with the ups and downs of the stock market, he may consider an asset allocation on higher side in stocks. Definitely not 100%
- 10. Principle Lower the age, higher the risk; and higher the age, lower the risk the investor can take
- 11. Financial Objective Method Status age < 30 years 31-45 46-55 56-60 Single Carefree Building Adding to Planning for wealth wealth carefree retirement Married, Top priority Building Planning Planning for no kids is property wealth retirement carefree retirement Married, Top priority Planning Planning for Planning for 2 kids is property child’s child’s higher child’s future education education
- 12. Time Horizon If it is a long time goal, pursue higher return by more risky portfolio Longer the investment period, lower the risk Shorter the investment period, higher the risk
- 13. Diversification in Bull and Bear Market
- 14. Potential to Reduce Risk or Increase Return
- 15. Current Status Emerging debt markets Continued sluggish growth in US economy will lead to volatility across asset classes, closely related to Dollar weakness and strength Gold funds won hands down with domestic investors in them pocketing 32 per cent return in 2011 Asset such as equities may stage a revival