Constant Rupee Plan
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CONSTANT RUPEE PLAN The objective of this plan is to balance the division between the conservative and aggressive components of the portfolio in terms of the target value. The target value could be fixed initially by the investor in a desirable proportion. For instance, a constant Rupee plan could consider the initial value of Rs 10,000 each between conservative and aggressive portfolios.
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Transcript of Constant Rupee Plan
CONSTANT RUPEE PLANThe objective of this plan is to balance the division between the conservative and aggressive components of the portfolio in terms of the target value.The target value could be fixed initially by the investor in a desirable proportion.For instance, a constant Rupee plan could consider the initial value of Rs 10,000 each between conservative and aggressive portfolios.There can also be an initial value of Rs. 15,000 and Rs. 5,000 in the aggressive and conservative portfolio components respectively.
CONSTANT RUPEE PLANSubsequently, changes in the portfolio components would cause a revision or shift of funds from one component to the other.The target portfolio value in the aggressive component could be fixed to the initial value and the excess shifts to the conservative portfolio.Similarly, a shortfall in the aggressive component is set right using the funds in the conservative portfolio.The purpose of this plan is to maintain the total value of the aggressive portfolio at a constant level.
CONSTANT RUPEE PLAN
Quarter Mkt Price (Rs.)
No. of Share
Value of Share components
(Rs.)
Value of conservative component
(Rs.)
Total (Rs.)
1 Year 1 100 100 10,000 10,000 20,000
2 85 100 8,500 10,000 18,500
3 80 125 10,000 8,000 18,000
Rs. 2000 shifted from conservative component to buy 25 shares
4 85 125 10,625 8,000 18,625
1 Year 2 95 125 11,875 8,000 19,875
2 97 104 10,088 10,037 20,125
Rs. 2,037 shifted to conservative component by selling 21 shares
CONSTANT RATIO PLANIn this plan, we maintain a ratio between the aggressive and conservative components of a portfolio.The initial ratio is FIXED by the investor and could be, say, 1:1 or any other desirable ratio.The fixed ratio is maintained until portfolio reaches the target price level, say, 20% rise or fall.
CONSTANT RATIO PLANMkt Price (Rs.)
No. of Share
Value of Aggressive
components(Rs.)
Value of conservative component
(Rs.)
Ratio of share to
conservative component
100 100 10,000 10,000 1 : 1
85 100 8,500 10,000 0.85 : 1
80 113 9,040 8,960 1.01 : 1
Rs. 1,040 shifted from conservative component to buy 13 shares
85 113 9,605 8,960 1.07 : 1
95 113 10,735 8,960 1.20 : 1
97 103 9,991 9,930 1.01 : 1
10 shares are sold and invested into conservative component to make ratio equal to 1:1 (appx)
VARIABLE RATIO PLANThis plan gives more flexibility to the investors to revise the portfolio components.When share price falls, the investor may shift major component of the conservative and aggressive componentsThe desired ratio of investment holding between aggressive and conservative components of a portfolio, hence, may vary according to the flexibility that an investor wishes to incorporate in the portfolio revision decision.When the share price rises back, the investor may shift funds back to maintain a stabilized portfolio.
VARIABLE RATIO PLANMkt Price (Rs.)
No. of Share
Value of Aggressive
components(Rs.)
Value of conservative component
(Rs.)
Total Portfolio
Value (Rs.)
Share as a % of portfolio
100 100 10,000 10,000 20,000 50.00
85 100 8,500 10,000 18,500 45.95
80 158 12,640 5,360 18,000 70.02
Rs. 4,640 shifted from conservative component to buy 58 shares
85 158 13,430 5,360 18,790 71.47
95 158 15,010 5,360 20,370 73.69
97 107 10,379 10,307 20,686 50.17
51 shares are sold and shifted Rs. 4,947 into conservative component
