Asset Allocation

Asset Allocation Optimisation

What is Asset Allocation?

A strategy that apportions investments to different classes of assets

It aims to balance risk and return

The three main asset classes usually considered are:

Equities

Fixedincome and Cash

Alternate investments (like gold/property etc.)

Each asset class has a different level of risk and return, so each will behave

differently over time

All ti i d di t i di id l' fi i l l i k t l d Allocation is done according to an individual's financial goals, risk tolerance and

investment horizon

Mutual Funds Investments are subject to market risks, read all scheme related document carefully.For any queries contact our Customer Service : 1800 425 5425 (Toll Free No).

Advantages of Asset Allocation

It is tough to predict which asset class will perform well at what time henceallocating across different asset classes is a sensible approach of investment

Asset Allocation reduces the risk of the portfolio without hurting the long termreturns

Asset allocation is recommended for all investors with varying risk preferences

It can be used as part of a broader strategy of financial planning


Types of Asset Allocation

Strategic Tacticalg

Is done after factoring market changes &investors financial objectives

R l i k fili & ll i

Is an allocation based on current market and economicscenario & allocation changes on regular basis

M k & fi i l bj i h d i ll Regular risk profiling & asset allocationreview not required

The assumption is that markets & assetclasses adjust over a period of time, hence

Markets & financial objectives change dramatically overinvestors horizon period hence allocations need to change

A dynamic & adjusting investment decision works in favourof the investorj p ,

there is no need for an adjustment

Performance may not be as good as anallocation with continuous monitoring

Regular review & adjustments in Asset allocation helps inmaking better portfolio decisions

It enables exploitation of better market & product

10%

Equity Fixed Income Alternatives

It enables exploitation of better market & productopportunities

10%

Equity Fixed Income Alternatives

50%40%

45%

45%


Investment Needs and Objectives

I am an investor looking for growing

my wealth in the longterm

i t t 0

I am investing for my childs education. I

am looking for investments with

i i i kinvestments0 minimum risk

I am young and want to take risks. I

want to invest where I can make

high returns.I am looking to invest my life

savings for getting regular cash flowsregular cash flows after retirement.


Recommendations

Since you are a conservative investor it is recommended to have ahigher exposure in debt and capital protected assets as yourhigher exposure in debt and capital protected assets as yourpriority seems to be capital protection and not maximization offunds.

You are also a conservative investor as you have a definite goalthat you would want to achieve. But your investments are longterm in nature.

As you want to grow investments taking measured risks toachieve your objectives, you are a moderate investor. It isrecommended to have a well balanced exposure in equity andrecommended to have a well balanced exposure in equity anddebt.

As you are an aggressive investor it is recommended that youAs you are an aggressive investor it is recommended that youhave maximum exposure in equities as your risk appetite is moreand your target is on maximization of returns


Investor Risk Preference

Conservative A conservative investor would predominantly have a higher

exposure in debt and capital protected asset classes, as his/her i it i it l t ti d t i i ti f f dpriority is capital protection and not maximization of funds.

Moderate A moderate investor would have a well balanced exposure to

both equity and debt.

Aggressive An aggressive investor would have maximum exposure toAn aggressive investor would have maximum exposure to

equity as his/her risk appetite is more.


Risk Vs Return

Small and Mid Cap Equity Funds

Moderate

Aggressive Asset

Allocation

p

e

c

t

e

d

t

u

r

n

s

Large Cap Equity Funds/ Dynamic Bond

FundsCorporateBond

Conservative A

Moderate Asset

Allocation

E

x

p

R

e

t

Gilt Funds

Short

Bond Funds

Asset Allocation

Risk

Term/Liquid Funds

Different asset classes have different risks and returns. Usually taking higher riskwould fetch higher returns but by using asset allocation, one can achieve higherreturns with lower risks.


Modeling Factors

Past Performance

Expected Macro Variables (GDP, Inflation etc.)

Earnings Per Share

Interest Rates

Investors views

Allocations based on optimized levelsAllocations based on optimized levels

Limits on each category


Scope of Asset Class Categories

Fixed Income EquityAlternate Asset

Class

Bond funds Short-term

L T

Equity Funds Large

Mid d S ll

Gold

Long-Term Mid and Small Sectoral/Themat

ic


Execution

Mutual Funds can be used for implementing the allocation

Asset rebalancing is to be done on a regular basis when market conditionschange

Tactical allocation tool can be used by the investors to rebalance theirportfolio based on the market conditions

This rebalancing of asset classes on a periodic basis ensures allocations arein tune with market/economic conditions


Flow of the Model


Overall Flow of the Asset Allocation Tool

Risk profiling of the investor

Suggested Allocation

Customization based on views

Final Report

Online Purchase


Risk Profile Questionnaire

Click this link if you know your risk preference and want to choose it

directly instead of going through a

Click on the right arrow to go through a questionnaire to figure

out your risk preferencey g g g

questionnaireout your risk preference.

There will be eight questions and it would take about two minutes to answer the same


Risk Profile Questionnaire

Click on Submit button to view your asset allocation report

Click on the left arrow or the numbers below to review your answers to the risk profiling questions

Choose your own risk preference

Select your risk preference directly if you know it.

Aft l ti i k f li kAfter selecting risk preference click submit to view the allocation report


Suggested Allocation Report

Your risk preference and

viewsviews

S t dSuggested allocations to

the asset classes


Suggested Allocation Report: Funds

Click here to input your

current allocation andallocation and

to view modified

allocations

Click on the buy button against the

fund tofund to purchase a fund onlinePrint this report for

your perusalCustomise the allocation based

on your views on the marketMutual Funds Investments are subject to market risks, read all scheme related document carefully.For any queries contact our Customer Service : 1800 425 5425 (Toll Free No).

Customisation of Allocation

Change your i k frisk preference

Input your view on Inflation

Input your view on the economic

hgrowthMutual Funds Investments are subject to market risks, read all scheme related document carefully.For any queries contact our Customer Service : 1800 425 5425 (Toll Free No).

Fund Allocation With Existing Investments

Click here to update your

allocation based on your

existing portfolio

Enter your existing allocation against each asset class


Online Purchase

Choose the folio number i hi hin which you want to buy

the fund

Click on the Buy Now button to be redirected to online purchase form


Thank You

Mutual Funds Investments are subject to market risks read all scheme related document carefullyMutual Funds Investments are subject to market risks, read all scheme related document carefully.For any queries contact our Customer Service : 1800 425 5425 (Toll Free No).

Appendix: Tactical Models Used

Efficient frontier for various risk & return scenarios

Mean Variance Optimization with BlackLitterman model & MonteCarloSimulation (Resampling)

Economic factors used for getting parameters for optimization

Time series analysis to link economic factors and asset class performance Time series analysis to link economic factors and asset class performance

Investor/Advisors views for inputs


Disclaimer

The Asset Allocation module is to assist investors to understand the allocation in different asset class on the basis of variousThe Asset Allocation module is to assist investors to understand the allocation in different asset class on the basis of variouscriteria. Investors may please note that planning of investment and taking investment decision might require professionaladvise, therefore investors are advised to consult their financial / investment advisor before taking any decision ofinvestment. The data generated herein is completely and solely based on the information/details provided by you inresponse to the questions specified. These questions and the calculations are developed and are based on predeterminedpresumptions/assumptions Such information and the resultant data is provided only for user's convenience and informationpresumptions/assumptions. Such information and the resultant data is provided only for user's convenience and informationpurposes. SBI Mutual Fund does not guarantee accuracy, completeness or correct sequence of any the details providedtherein and therefore no reliance should be placed by the user for any purpose whatsoever on the information contained /data generated herein or on its completeness / accuracy. The use of any information set out is entirely at the User's own risk.User should exercise due care and caution (including obtaining of advise of tax/ legal/ accounting/ financial/ other

f i l ) i t t ki f d i i ti itti t t th b i f th i f ti t i d / d tprofessionals) prior to taking of any decision, acting or omitting to act, on the basis of the information contained / datagenerated herein.Investors should also note that SBI Mutual Fund has neither done a detailed risk profiling of the investor or nor has taken intoconsideration the investors portfolio of investment and various other factors which may be necessary for renderinginvestment advise. The views should not construed as complete investment advise. SBI Mutual Fund does not undertake anyli bilit ibilit t d t d t N thi t i d h i h ll t tliability or responsibility to update any data. Nothing contained herein shall amount to anoffer, invitation, advertisement, promotion or sponsor of any product or services. The use of this information is subject to theterms and conditions governing such products, services and offers. The information contained / data generated herein maybe subject to change, updation, revision, verification and amendment without notice. The views constitute only the opinionand do not constitute any guidelines / recommendations on any course of action to be followed by the investors. The view is

f i l id f h i ll i i f hi i l h ld k inot meant to serve as a professional guide for the investors All recipients of this material should seek appropriateprofessional advice and carefully read the scheme information document/ statement of additional information and beforedealing and or transacting in any of the products referred to in this material make their own investigation. The Fund, theAMC and Trustees and any of its directors, officers, employees and other personnel shall not liable for any loss, damage ofany nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit

/in any way arising from the use of this material in any manner whatsoever. The recipient alone shall be fully responsible/areliable for any decision taken on the basis of this material.

Date post:	07-Jan-2016
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Asset Allocation

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