You are on page 1of 8

CONSTANT RUPEE PLAN

The objective of this plan is to balance the division between the conservative an
d 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 in
stance, 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 val
ue of Rs. 15,000 and Rs. 5,000 in the aggressive
CONSTANT RUPEE PLAN
Subsequently, 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 aggr
essive component could be fixed to the initial value and the excess shifts to th
e conservative portfolio. Similarly, a shortfall in the aggressive component is s
et right using the funds in the conservative portfolio. The purpose of this plan
is to maintain
CONSTANT RUPEE PLAN
Quarte r Mkt Price (Rs.) No. of Share Value of Value of Share conservati compone
nt ve s componen (Rs.) t (Rs.)
10,000 8,500 10,000 10,000 10,000 8,000
Total (Rs.)
1 Year 1 2 3
100 85 80
100 100 125
20,000 18,500 18,000
Rs. 2000 shifted from conservative component to buy 25 shares
4 1 Year 2 2 85 95 97 125 125 104 10,625 11,875 10,088 8,000 8,000 10,037 18,625
19,875 20,125
Rs. 2,037 shifted to conservative component by selling 21 shares
CONSTANT RATIO PLAN
In this plan, we maintain a ratio between the aggressive and conservative compone
nts 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 PLAN
Mkt No. of Price Share (Rs.) Value of Value of Ratio of Aggressive conservativ s
hare to components e conservati (Rs.) component ve (Rs.)
componen t
1:1 0.85 : 1 1.01 : 1
100 85 80
100 100 113
10,000 8,500 9,040
10,000 10,000 8,960
Rs. 1,040 shifted from conservative component to buy 13 shares
85 95 97 113 113 103 9,605 10,735 9,991 8,960 8,960 9,930 1.07 : 1 1.20 : 1 1.01
: 1
10 shares are sold and invested into conservative component to make ratio equal
to 1:1 (appx)
VARIABLE RATIO PLAN
This plan gives more flexibility to the investors to revise the portfolio compone
nts. When share price falls, the investor may shift major component of the conser
vative and aggressive components The 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 revi
sion decision. When the share price rises back, the
VARIABLE RATIO PLAN
Mkt No. of Value of Value of Total Share as Price Share Aggressiv conservati Por
tfoli a % of (Rs.) e ve o Value portfolio componen componen (Rs.) ts t (Rs.) (Rs
.)
100 85 80 100 100 158 10,000 8,500 12,640 10,000 10,000 5,360 20,000 18,500 18,0
00 50.00 45.95 70.02
Rs. 4,640 shifted from conservative component to buy 58 shares
85 95 97 158 158 107 13,430 15,010 10,379 5,360 5,360 10,307 18,790 20,370 20,68
6 71.47 73.69 50.17
51 shares are sold and shifted Rs. 4,947 into conservative component

You might also like