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

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

LIC's JEEVAN SHIKHAR

  LIC's Jeevan Shikhar is a participating, non-linked, saving cum protection single premium plan wherein the risk cover is ten times of Tabular Single Premium. The proposer will have an option to choose the Maturity Sum Assured. The premium payable shall depend on the chosen amount of Maturity Sum Assured and age at entry of the life assured. This plan also takes care of liquidity need through its loan facility. The plan will be open for sale for a maximum period of 120 days from the date of launch. 1.   BENEFITS   : a) Death Benefit: On death during first five policy years: Before the date of commencement of risk   :   Refund of Single Premium without interest. Single Premium mentioned above shall not include any extra amount if charged under the policy due to underwriting decision and taxes. After the date of commencement of risk   : "Sum Assured on Death" equal to 10 times the tabular single premium shall be payable. On death after completion of five policy years but b...

CNX Midcap vs BNP Paribas Midcap Fund

BNP Paribas Midcap Fund - Invest Online   Te  performance of BNP Paribas Midcap Fund  – which has across the last 3 years generated superior returns over the benchmark – especially when the markets have gone down the fund has handsomely outperformed the benchmark preserving the capital of the investors. The fund has been able to do this only due to the superior stock selection process ( BMV approach) that is diligently followed at BNPP.   Highlights of BNP Paribas Mid Cap Fund:   Investment Objective : BNP Paribas Mid Cap Fund gives an investor exposure to invest in the various quality midcap stocks. The fund also has some exposure to large as well as small cap stocks.   Investment Approach : BMV ( Quality and scalability of Business →Good Management → Reasonable Valuation ) with Bottom-up stock picking.   Most of the investors are way happier if the fund that they have invested in is a significant Outperformer in tough times than in Good ti...

Investment Strategy - What is Sector Rotation Theory?

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   The economy goes through cycles : it expands for a few years and then contracts. Study of historical data suggests that different sectors tend to perform well on the stock markets during different stages of the economic cycle. While history never repeats itself exactly, some broad patterns tend to recur. Investors can take advantage of the sector rotation theory to move their money from those sectors that have seen their best times to those that are likely to do well in future.   The person who developed the sector rotation theory is Sam Stovall, chief investment strategist at Standard & Poor's. He developed this theory by studying data on economic cycles going as far back as 1854 provided by the National Bureau of Economic Research ( NBER ) of the US.   When trying to correlate stock-market perfor...

Rajiv Gandhi Equity Savings Scheme (RGESS) set for launch this week

The finance ministry is set to notify the Rajiv Gandhi Equity Savings Scheme ( RGESS ) this week.   Though Finance Minister PChidambaram had approved on September 21, the scheme announced in this year's Budget, and had said that the revenue department will notify the scheme and the Securities and Exchange Board of India ( Sebi ) would issue relevant circulars within two weeks, it is yet to become operational.   A senior finance ministry official said the revenue department was expected to notify the scheme any day now to attract retail investors to the equity segment.   He added that Sebi was not required to issue any circular for the operationalisation of the scheme and that after the issuance of the revenue department's notification, investors would be able to avail of the benefits of the scheme.   The official accepted that implementation of the scheme had been delayed due to the deliberations on inclusion of mutual funds ( MF ) in it.   ...
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