Investment Allocation

Investors decision on asset allocation is divided into the following Categories. This
division helps us understand what the investor is looking from his investments;

Investors Profile:
Goals
C. Asset Allocation Model
D. Investment Decisions
E. Portfolio Records and Monitoring

Investors profile:

Name: Mr. Robinson Sex: Male Status: Married

Age: 27 Income Bracket: 20-24,000

Occupation: Sociology Teacher

Investment required: 200,000 Dhs

Mr. Robinson is experiencing first-time interaction with our agency. He is a

teacher who is known to much paradox of spending and saving... He wishes to
invest money today so that he may spend better in years time.
We can label that as his objective is:
To save the money today so that he can have better luxuries in his retirement age.
For instance, retirement pension.

His age signifies that Mr. Robinson is unlikely to accept the assets with high
returns. His eagerness to earn more can be derived from his income, however his
age signifies that he is looking for security for future. He is earning a good living
already, yet, he wishes to invest to be better off. He is not that young, where he is
ready to accept some risks. With 20,000 dhs as his income, even if the loss is of
200,000, he is able to recover all the money back in 10 months.
So he can be classified as a risk-taker. Who is willing to take high risk to get high
returns?

Investment Goals (20%)

The client, Mr. Robinson, is looking for high returns in compounded form. He is
determined to invest on yearly basis. If he feels satisfied with the returns of the
portfolio that our company presented, then he may invest again.
Since this is his first type of investing activity, he holds the basic requirements. He
needs 15% return back on his capital investment. He needs to save for 5 months to
make the investment of 200,000 dhs.

His saving proportion is 60%

His current savings: 80,000 (OPENING)

Savings for next 10 months: 50,000 (24000/2 * 10)

Investment Capital TOTAL: 200,000 DHS

For His every dhiram saved today, he wishes to spend 1.15 Dhs in a year time.
Looking at the factual data of inflation and index prices, the minimum required
rate of return would be 4 percent.

Asset Allocation Model (10%)

Now, we have to divide accordingly. With looking at the risks and returns we shall
find the suitable divison of assets for portfolio

Assets Weightage ER Prob.

Real Estate`1 10% 14% 85%
Real Estate `2 10% 13% 92%
Stock `1 30% 27% 79%
Stock `2 10% 17% 85%
Stock'3 15% 19% 90%
Bond1 20% 5% 99%
Cash and Cash Equivalent 5% 0 0
100% 14% 76%
 Weightage

Real Estate`1
5% 10%
Real Estate `2
20% 10%
Stock `1
Stock `2

15% Stock'3
30%
Bond1
10%
Cash and Cash Equivalent

As we can see in the following CHART, Stocks cover about 55% of the total
investment amount. The reason is quite simple, as the investor, MR
Robinson, is a young investor seeking to get high future returns. The stocks
are bit risky but they grant high future returns.

20% is invested in Real Estate Business, as it offers more security yet high
stable returns.

Liquidity is least demanded from the investor, but for better investment
opportunities, 5% of cash deposit is held in savings.

Bonds diversify the risk and bring it down. They occupy around 20% of
investement

D. Investment Decisions (20%)

The investment timeframe is annually described. Stocks with highest returns have
highest risk. The Portfolio theory is often applied to help the investor achieve a
satisfactory return compared to the risk taken. The portfolio helps diversify the risk
and returns in different assets classes.

INVESTMENT DECISON OF
ALLOCATTION
Cash
Real State
Bonds

Stocks

As per chart above, we can see that the highest returns are associated with Stock
1, but the stock has the lowest probability of those returns (79%).

Overall, using the portfolio model formula and expected returns formula, we can
derive that the portfolio has a total of 14% EXPECTED RETURNS WITH THE
PROBABILITY OF 76%.

Assets Weightage ER Prob.

Real Estate`1 10% 14% 85%
Real Estate `2 10% 13% 92%
Stock `1 30% 27% 79%
Stock `2 10% 17% 85%
Stock'3 15% 19% 90%
Bond1 20% 5% 99%
Cash and Cash Equivalent 5% 0 0
100% 14% 76%

E. Portfolio Records and Monitoring (20%)

Portfolio performance: Measure annually. In general, you should be examining the

return on your portfolio to make sure it is within the target range you expected,
based on the investment mix you have settled upon. If it isnt, you may need to
make some adjustments in your future projections.

For instance, you may have to increase your savings rate, take on more risk to
achieve the target that you set, or simply adjust your target value downward,
settling for less in the future.

How do you measure portfolio performance? Portfolio management programs offer

the easiest solution, and a sampling of the more popular programs is presented in
Table provided above.
Some of the softwares can help monitor portfolios performance. Basic program as
Excel helps identify basic objectives as Expected Returns Actual Returns Etc

Reports can be made in written formats of words and can be summarized for
investors briefing.