1. Islamic Wealth Planning and
Management
By Md. Shahedur Rahaman Chowdhury
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2. Topic Three:
Wealth (asset) allocation process
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3. Describe the main components of wealth allocation
process and explain the significance of each to the
success of wealth planning.
• One of the most important aspects of successful
wealth planning is the process of wealth allocation.
– Establishment of objectives
– Identifying potential opportunities
– Determining risks and constraints
– Potential investment channels
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4. Financial planners should be aware of two major
components
• Investment Policy statement
• Portfolio Management Process
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5. Investment Policy Statement
i. Return Objectives
• Stability of Principal
• Income
• Growth of Income
• Capital appreciation
ii. Risk Objectives
iii. Identifying Constraints
• Internal
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6. Investment Approach
• Passive Investment Approach
• Active Investment Approach
• Semi-Active Investment Approach
Transaction Cost:
• Explicit
• Implicit
• Missed trade opportunity Cost
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7. Constraints
i. Internal
• Liquidity
• Time
• Unique Client Circumstances
ii. External
• Tax issue
• Legal issue and regulatory requirements
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8. Risk tolerance/ Interaction between Willingness and
Ability to take risk
Willingness to take Ability to take Risk
Risk
Low High
Low ?
High ?
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9. The portfolio Allocation Scoring system (PASS)
1. High long –term total return
• Most (5)
• Very (4)
• Some (3)
• Little (2)
• None (1)
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10. The portfolio Allocation Scoring system (PASS)
2. Accumulation of deferred Capital gains
•Most (5)
•Very (4)
•Some (3)
•Little (2)
•None (1)
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11. The portfolio Allocation Scoring system (PASS)
3. Tax Advantages
•Most (5)
•Very (4)
•Some (3)
•Little (2)
•None (1)
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12. The portfolio Allocation Scoring system (PASS)
4. High current income
•Most (1)
•Very (2)
•Some (3)
•Little (4)
•None (5)
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13. The portfolio Allocation Scoring system (PASS)
4. Low total return fluctuation
•Most (1)
•Very (2)
•Some (3)
•Little (4)
•None (5)
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14. The portfolio Allocation Scoring system (PASS)
6. Low single –period loss probability
•Most (1)
•Very (2)
•Some (3)
•Little (4)
•None (5)
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15. The portfolio Allocation Scoring system (PASS)
7. High degree of liquidity
•Most (1)
•Very (2)
•Some (3)
•Little (4)
•None (5)
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16. The portfolio Allocation Scoring system (PASS)
Total Score Money Market / Fixed Income/
Equities
35 5/5/90
29-34 10/10/90
23-28 20/20/60
17-22 30/30/40
11-16 40/40/20
7-10 50/40/10
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17. End
Q&A
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