Skip to main content

Asset allocation is the answer for investment Puzzle

 

 

If you list the goals you are saving for, attainting them becomes easy

VARIETY is fast emerging as a bitter pill for investors. Just like shopping in a departmental store becomes tedious with dozens of choices on offer, the same often occurs in the investment market, but the effects are even more substantial with bigger consequences. Financial Chronicle talks to experts to tell you how to simplify and choose from the array of mutual funds, insurance products and company deposits available in the market.

The cornerstone of any good financial plan is a sensible, personalised asset allocation strategy.

For a common investor, the classes of investible asset are – real estate, gold, equity and debt. Each of them have their own distinct track record of risk and reward.

Understand yourself:

 

If you list the goal for which you are saving, attainting the target becomes much easier.

However, understanding one's risk appetite may be difficult.

Your ability and willingness to lose some or all of the original investment in exchange for greater potential returns is your risk appetite.

Slot yourself as a conservative investor (not at all comfortable taking risk) or a moderate investor (can take reasonable risk) or an aggressive investor (very comfortable taking risk to earn extra return). Based on your risk appetite and your investment horizon, you can figure out the allocation of your savings into equity and fixed instruments.

For example, if the tenure is very less and risk appetite is very low, then the proportion of fixed income instruments will be more and that of equity will be less. Simultaneously, if the tenure is long and if the risk appetite is more, then the proportion of equity will be more as equity is known to perform better in the long run.


Keep it simple:

 

Depending on the time frame, risk appetite and liquidity needs of the investor, a plan should be formed and any investment should be made within the parameters of this asset allocation plan.

Many investors holding dozens of MF folios and several deposit products in their portfolio… What investors should do is select a handful of 'best-of-breed' products and stick to them (in terms of additional investments) for the long-term rather than going after 'flavour-of-the-month' products that will invariably keep coming up.

 

Know what you eat:

You must completely understand the investment that you are making. All pros and cons must be thoroughly understood before making any investments.

It's not that every new product will be better in terms of performance unlike the existing ones. It is good to diversify, but do not over diversify. Diversify as much as you can track and manage. As they say, too many cooks spoil the food.


Consult a wealth doctor:

Your financial advisor is your `wealth doctor'. Be true to him/her to get the best investment solution.

Trust your financial advisor and ask him why you are investing in what is suggested and how it suits your investment criteria.

Speak to a financial planner. If he starts recommending (selling) products within five minutes of your conversation, avoid him/her.


Products after everything should fit your financial plans, which have to be simple, easy, flexible and devoid of any charges or commitments.

Evaluate your investment at least once in a quarter. If the committed or expected returns are not visible, then change your advisor. Haven't we heard of `second opinion'?

 

Popular posts from this blog

Real Returns in Investing

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Real Returns in Investing     A Anil Singh (name changed), 44, works with a private company and believes in investing his entire savings in fixed deposits. His financials from the year 2000 till date is given in the table. Anil's savings in FDs gave him an average return of around 8%. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 49.80 lakh. The value of his investment today is around Rs 66.71 lakh. Naveen Singh (name changed), 44, works in a similar profile like Anil. However his expenses were on the higher side. His financials are as in the table. Naveen invested only in equities. The total amount saved over the 174 months (From January 2000 to June 2014) is Rs 38.40 lakh. The v...

Budget 2014 Highlights for Saving

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   The new finance minister Arun Jaitley has just presented his first budget. What measures does the budget contain that will specifically impact savers and investors? Here they are: 1. Housing loans exemption for self-occupied properties increased to Rs2 lakh: Earlier this amount was Rs1.5 lakhs. This move barely keeps pace with the inflation in asset values.   2. Investment limit under 80 (C) increased to Rs1.5 lakh: This is a good move again and offers some relief to taxpayers.   3. IT exemption increased to Rs2.5 lakh, Rs3 lakh for senior citizens. This comes as a minor relief for taxpayers.   4. Annual PPF ceiling to be enhanced to Rs1.5 lakh, from Rs1 lakh: This is in tune with the change in 80C.   5. Long term capital gains tax for debt funds has been rai...

ICICI Prudential MIP 25 - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential MIP 25     (CRISIL Rank 2)   This scheme was launched March 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme. The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 24% equity, 72% debt and 4% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.   For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mai...

Franklin India Smaller Companies Fund - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Franklin India Smaller Companies Fund   While the universe of small-cap stocks in India is vast, there are very few equity funds which take on the task of sifting through this space for good long-term bets. Franklin India Smaller Companies Fund has managed this with aplomb. What we like about this fund is its significant out-performance of its category and benchmark over the last four years, and its ability to moderate portfolio risk despite investing in the riskiest segment of the equity market. This fund's stock selection strategy, like that of Franklin India Prima Fund is focused on finding companies that generate positive cash flows across business cycles. High return on investment and manageable leverage are also filtering criteria. Says R. Janakiraman, fund ma...

How to open a Capital Gains Account?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to open a Capital Gains Account? You can open a capital gains account in an authorized bank. The Government has notified 28 banks which can open the Capital Gains Account on behalf of the Government. You have to apply for opening the account by filling out the required application form (Form A) and submit proof of address, PAN card and photograph. You cannot withdraw funds from a capital gains account using a cheque book or ATM, like you do in your normal savings bank account. There are procedures to be followed to withdraw funds from the capital gains account. Investment in Specified Bonds Section 54EC of Income Act provide that if the seller invests whole or part of capital gains arising from the sale of asset in specified Capital Gains, within a period of six months of the ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now