Assignment 2

Investment Policy Statement

Group- 1
Dhruvin Patel-MBA07101
Yogi Raval-MBA07111
Rohan Aggarwal-MBA07116
Namrata Chaudhari-MBA07095
Komal Verma-MBA07069
Sahil Kanojia-MBA07120
Pradyut Suman Kakati-MBA07104
Executive Summary:

Client Name: ABC

Client Type: Individual Investor

Client Subtype: Taxable Portfolio

Type of Policy: Individual

Current Assets: Rs. 50,00,000

Expected Return: 12%

One-year Loss Limit: - (6-7%)

This Investment Policy Statement should be reviewed by an attorney knowledgeable in this specific
area of the law. Any change to this policy should be communicated in writing and on a timely basis to
all interested parties. If any term or condition of this Investment Policy Statement conflicts with any
trust and/or plan document, the document shall control it, as long as such term or condition is consistent
with the law.

Purpose:

The purpose of this Investment Policy Statement (IPS) is to assist the client in constructing an
appropriate investment portfolio. This includes establishing a systematic procedure for selecting,
monitoring, and, as required, replacing financing options. Specifically, the IPS is meant to:

1. Define investment objectives for the Plan

2. Provide participants with a variety of diversified financing options within the risk-return
spectrum to guide them in choosing retirement investment decisions
3. Specify the criteria and methods that will be utilized by the Plan to choose investment strategies
4. Define the monitoring procedure for ongoing financing possibilities.

The client’s expectations are as follows:

1. Long-term growth and capital preservation

2. Risk profile: Conservative

3. Time: Long-term (>10 years)

4. Generating expected return: 12%

This "IPS" shall be reviewed annually by the group and, if necessary, revised to reflect changes in the
capital markets, Investment plan participant objectives, trends, legislative and regulatory changes, and
other elements essential to the Investment plan.
Statement of Objective:

Our objective is to create a managed portfolio that delivers real growth, after inflation, with an
appropriate degree of risk for your return. Following are your portfolio's objectives:

● To create a considerable amount of portfolio income while earning a reasonable return net of
inflation and reducing the risk of stock market changes.

Portfolio Considerations

The guidelines for investing are based on a time frame of more than 10 years. This long-term view is
used to decide how to divide up the assets. It is assumed that there are no short-term liquidity needs or
that they should be met by cash flows. There shouldn't be much needed for cash in the short term.

The client knows that taking some risks is necessary to reach the investment goals. The portfolio was
given a loss limit of (-6% to -7%) per year. Due to the client's long-term goals, their current financial
situation, and a number of other factors, they may be able to handle short-term changes in the market
value and rate of return in order to reach their long-term goals.

According to the Client, the required investment objective is a long-term rate of return on assets of at
least 12%, which is higher than the rate of inflation (CPI) by 5.99%. The client's target rate of return is
based on the assumption that future real returns will be comparable to the long-term rates of return for
each asset class in IPS. The client is aware that market performance fluctuates and that a return rate of
12 per cent may not be meaningful in certain periods.

Duties and Responsibilities:

1. Consult with client to make asset allocations

2. Properly report and control all the investment costs incurred

3. Consistently value portfolio holdings

4. Selecting assets keeping in mind reasonable risk appetite and returns

5. Portfolio caretaker and is responsible for the protection of client’s assets

6. Provide monthly reports

Asset Class Allocation and Guidelines:

According to the rules, long-term investment performance is determined by asset performance.

Historically, while interest-generating investments, such as bonds, have the advantage of the relative
stability of principal value, they provide little opportunity for real long-term capital growth due to their
susceptibility to inflation.

In view of the client's requirement of a conservative risk profile, asset allocation will be 60% stock asset
and 40% fixed.

Focusing on balancing the risks and rewards of each broad asset class, the following implementation
peer groups were selected as the investment portfolio.

According to the expectations of the client, asset classes will include:

Index Return Percentage

Government Bonds S&P BSE India Government Bond Index 7.23% 25

Corporate Bonds S&P BSE India Corporate Bond Index 8.97% 15

Midcap 100 Nifty Midcap 100 16.47% 10

FMCG Nifty FMCG 14.31% 25

Blue Chip Stocks NSE: Bluchip 15.37% 25

Government Bonds:

Government bonds are debt instruments issued by the federal and state governments of a nation to
support its operations and regulate the money supply. When the government requires funding for
infrastructure development and government spending, these bonds are frequently the solution.

Corporate Bonds:

A corporate bond is a type of financial security issued and sold to investors by a corporation. The
company receives the necessary cash in exchange for a certain amount of interest payments at a fixed
or variable interest rate. At the bond's expiration, or "maturity," payments cease, and the initial
investment is refunded.

Midcap 100:

The purpose of the NIFTY Midcap 100 Index is to track and serve as a benchmark for the midcap
market segment. The Representation of the Market As of March 29, 2019, the NIFTY Midcap 100 Index
reflects approximately 9.9% of the market capitalization of NSE-listed stocks.
FMCG:

The fast-moving consumer goods (FMCG) industry is the fourth largest industry in India, with
household and personal care products accounting for fifty per cent of FMCG sales in India. Increasing
awareness, greater access, and shifting lifestyles have been the sector's primary growth factors.

Blue Chip Stocks:

A blue-chip stock is referred to the stocks of corporations that are historically financially strong and
have a long history of healthy operations and consistent earnings. Additionally, these stocks often
provide investors with a consistent dividend. A blue-chip stock is typically the market leader or one of
the top companies by market capitalization in its industry. These factors are the reason why the majority
of investors fancy these stocks.