Investment Landscape Asset Classes Asset Allocation Yugal Bhushan
Investment Landscape Asset Classes & Asset Allocation Yugal Bhushan Director
�� Key Investment Considerations Liquidity Safety You get your money back when you want it You get your money back Plus Convenience How easy is it to invest, disinvest and adjust to your needs? Post-tax Returns How much is really left for you post tax?
ASSETS ü Any tangible or intangible thing which have some positive economic value.
ASSET CLASSES An asset class is a group of financial instruments which have similar financial characteristics and behave similarly in the marketplace.
Types of ASSET CLASSES Asset classes
Real Estate Real estate is considered as the most important and popular among all the asset classes. However, the popularity of this asset category is largely because of a reason not related to investment. ü The word used here is “expense”, and not “investment”. ü Real estate could be further classified into various categories, viz. , residential real estate, land, commercial real estate, etc.
Commodities ü On a regular basis, people consume many commodities, e. g. agricultural commodities like spices; petroleum products such as petrol and diesel; or metals like gold and silver. ü When someone invests in these commodities, the prices are almost in sync across the world.
Fixed Income ü There are various forms of borrowing, some of which are through marketable instruments like bonds and debentures. ü Many bonds pay regular interest; thus the investors can expect current income. ü Bonds are generally considered to be safer than equity. However, these are not totally free from risks.
Equity § This is the owner’s capital in a business. Someone who buys shares in a company becomes a part-owner in the business. § Equity investing has generated returns in excess of inflation, which means the purchasing power of one’s money has increased over the years.
Asset allocation ü Asset Allocation is a process of allocating money across various asset categories in line with a stated objective. ü There are two popular approaches to asset allocation. ü Strategic asset allocation ü Tactical asset allocation
Strategic asset allocation ü Strategic Asset Allocation is allocation aligned to the financial goals of the individual. ü It considers the returns required from the portfolio to achieve the goals, given the time horizon available for the corpus to be created and the risk profile of the individual.
Tactical asset allocation ü An approach may be to take advantage of the opportunities presented by various markets at different points of time, but the primary reason for doing so is to improve the risk-adjusted return of the portfolio.
Questions 1. Which among the following investment avenues does not offer income on a regular basis? A. Real estate B. Physical Gold C. Stocks D. Debentures 2. Which amongst the following asset categories can also be purchased for consumption purposes apart from investment? A. B. C. D. Real estate Stocks Bonds Debentures
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