Investors Policy Statement for Mr.

Avinash topno
1. Background
Avinash, aged 42, lives in delhi. He is a manager in airtel, with his wife who is a homemaker.
They have a nuclear family with one son and daughter is well settled and financially
independent and his son who is pursuing his graduation and wants to pursue M.B.A from IIM.
The investment plan is developed in 2019.

2. Return Objectives
He wishes to meet his and his wife’s financial security and maintain their standard of living after
his retirement. However, their priority is their son’s educational expenses and daughter’s
marriage expenses. The investment portfolio must replace Avinashi’s salary after retirement.
Therefore, the investment objectives are: maintaining real value of portfolio to provide for
retirement, medical requirements and son’s education. Considering these objectives, the
expected after-tax return from the portfolio is 8 % in real terms. The total return required is 12.5%
(assuming inflation of 4%).

3. Risk Objectives

Ability: His ability to take risk is low. Factors lowering his risk-taking abilities are short
time horizon and his age. Factor increasing his risk-taking ability is the amount of
income he generates annually and his low expenses.

Willingness: His willingness to take risk is very low due to his poor knowledge of capital
market. He is conservative. It can be seen from his current asset base. He has invested
only in fixed deposits and most of his earning are in saving deposit account.

Overall:

4. Constraints

 Time Horizon: Avinash family’s time horizon starts after Avinashi’s retirement.
Coincidently, the retirement of Avinash and his son’s education and marriage
expenses needed after retirement

 Liquidity: Avinash has one-time expense of home loan payment of Rs. 1500000.
And misc. expenses 1500000. Apart from this he does not have any liquidity
requirements.
  Taxes: Avinash’s salary falls under 30% income tax slab. His capital gain tax will be
subjected to 30% tax.

 Legal & Regulatory requirement: There is nothing beyond normal duty.

Asset Allocation:

Allocation Permissible range

Bonds 25% 30-50%
FD 35% 20-45%
Mutual funds 20% 15-30%
Equity 10% 0-10%

Since, Avinash is risk averse, the maximum permissible range to invest in risky assets is 10%. So
major investments are done in less riskier assets.