Page 243 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes

Notes It is widely regarded that five benchmark portfolios should satisfy the investment
needs of most persons. Wealth managers have been known to develop even up to sixty
‘model’ portfolios for their persons.

The current asset allocation is a long term strategic allocation across various asset classes based
on historical returns and the outlook for those assets over at least a five year time horizon.
The benchmark portfolios are constructed to satisfy the needs of persons with differing attitudes
to risk and reward and differing income requirements. The basic attributes of each benchmark
portfolio are summarised as follows:

Table 13.2

Portfolio Cash Fixed interest Shares Property
(debt)
Conservative Current 25 65 10
Benchmark 20-30 40-75 5-20
Conservative Balanced Current 20 60 20
Benchmark 15-25 35-70 15-30
Balanced Current 10 45 45
Benchmark 5-15 10-50 40-60
Growth Current 10 25 50 15
Benchmark 5-20 10-30 40-75 10-30
Aggressive Growth Current 5 5 70 20
Benchmark 0-20 0-15 45-85 10-30

Notes The above table originally included investments in international debt and shares,
which we have not considered. Keeping in mind Indian conditions, property is not
considered in the first three portfolios as there are no property management trust products
in India.
Conservative

The portfolio aims to produce a high level of secure income with a strong emphasis on
preservation of capital. The possibility of a negative total return over a one year period is low,
although it may occur in a time of severe market downturns in more than one asset class. Capital
growth on this portfolio is expected to be very modest over the medium to long term.

Conservative Balanced

This portfolio has a strong focus on secure income. There is also the expectation of a modest
level of capital growth over the medium to long term. The income stream is relatively stable
and provides some growth with its exposure to shares. The possibility of a negative total return

238 LOVELY PROFESSIONAL UNIVERSITY