What are Model Portfolios ~ A Financial Planner Tool

What are Model Portfolios ~ A Financial Planner Tool

Model Portfolios, Strategic Asset Allocation, Tactical Asset Allocation, Financial Planner, Financial Planning, Equity, Debt, Gold, Real Estate.

Model Portfolios

Since investors’ risk appetites vary, a single portfolio cannot be suggested for all. Financial planners often work with model portfolios – the asset allocation mix that is most appropriate for different risk appetite levels. The list of model portfolios, for example, might read something like this:

Young call centre / BPO employee with no dependents

50% diversified equity schemes (preferably through SIP); 20% sector funds; 10% gold ETF, 10% diversified debt fund, 10% liquid schemes.

Young married single income family with two school going kids

35% diversified equity schemes; 10% sector funds; 15% gold ETF, 30% diversified debt fund, 10% liquid schemes.

Single income family with grown up children who are yet to settle down

35% diversified equity schemes; 15% gold ETF, 15% gilt fund, 15% diversified debt fund, 20% liquid schemes.

Couple in their seventies, with no immediate family support

15% diversified equity index scheme; 10% gold ETF, 30% gilt fund, 30% diversified debt fund, 15% liquid schemes.

Please note that these percentages are illustrative and subjective. The critical point is that your financial planner should have a model portfolio for every distinct client profile. This is then tweaked around based on specific investor information.

Thus, a couple in their seventies, with no immediate family support but very sound physically and mentally, and a large investible corpus might be advised the following portfolio, as compared with the previous model portfolio.

20% diversified equity scheme; 10% diversified equity index scheme; 10% gold ETF, 25% gilt fund, 25% diversified debt fund, 10% liquid schemes.

Within each of these scheme categories, specific schemes and options can be identified. So next time when you sit with your financial planner, don’t catch whatever advise gets thrown at you ~ Question him about the model portfolios in his toolkit and the reasons behind them.

It will help you develop a sustainable financial plan

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