Skip to main content

Asset allocation - Basics

Invest Mutual Funds Online

Call 0 94 8300 8300 (India) 

You need to ensure your asset allocation ratio is always in line with your risk appetite. This is even more so when the markets are volatile. A sharp market movement can change the values of specific asset classes in a portfolio.


   As an investor, have you ever stuck to one product for your portfolio? Chances are no. You would have shifted from one investment option to another depending on the preference of your peer group. It could well have been debt in the 90s, equity in mid-2000, and gold in the last couple of years.


   Has the strategy been very effective? Yes and no could be the answer. It would have proved very effective if the timing was perfect and you would have got it all wrong if you had chased an investment product at the wrong time or at its peak. Adopting the second strategy is a lot easier than the first one. So, in effect, timing the market for any product is a challenging task. The best way to make use of different products is by following the asset allocation pattern.


   If the decision to allocate money across different products is a tough challenge, managing and maintaining it is even tougher a challenge. Due to variance in performances of different products, maintaining the percentage of allocation is even tougher. Hence, the asset allocation strategy requires greater discipline, better time management with respect to fund needs and long-term planning. While many know this, the challenge has been more with respect to implementation. Here are some tips to help you maintain asset allocation according to your needs:

Plan needs    

Plan your financial needs according to the short, medium and long terms. The classification will make the choice of product a lot easier. For instance, short-term needs can do away with products like property or equity, and focus on a narrow range of options.


   On the other hand, for long-term needs you need not worry about fluctuations in the performances of products in the short term.

Sustained monitoring    

Any wealth creation requires continuous focus and regular review. This could be in the form of sustained contribution at regular intervals or enhancing the contributions to the investment process. For instance, no investor can invest a sum of Rs 5 lakhs at one go for his long-term needs for the next 20-25 years in the current scenario. A 25-year-old professional may hate the prospect of investing on a monthly or annual basis for his retirement though he has the alternate option of investing Rs 20-25 lakhs at one go. At the age of 25, not many (you could even say nobody) will have access to such funds and hence, accumulation is the only option.


   It is in this context, that a regular review is a necessity, not because of the long-term nature of the investment process but also due to the change in investment capabilities of an investor. In 1995, there would have been only a handful of investors who had the ability to invest Rs 1 lakh on a monthly basis. Today, many middle income families have been managing to do that without a fret. Hence, it is important to scale up the investment amount at regular intervals to counter the inflation rate and take care of the long-term needs in life. The change is not restricted to the supply side (investment capabilities) as even the demand (fund needs) undergoes change at a rapid pace.

New options    

While asset allocation is a necessity, the basket of products needs to be reviewed, and additions and deletions may become a necessity at regular intervals. Since every decade has witnessed the emergence of new options, commitment to a single product over a very long period of time may not be feasible. Instead, move your money across products based on their risk profile.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

 

Popular posts from this blog

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...
Read more

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...
Read more

Save Tax With Mutual Funds

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       Mutual funds are ideal as long term investment avenues for retail investors. To encourage investments in this avenue, the Government of India offers investors a spate of tax benefits thus ensuring maximum benefit from mutual funds held beyond a year. Sample some of the key benefits and refer to the table for a detailed list of tax rates for different types of schemes ·        Avail deductions under Sec 80C of the Income Tax Act by investing up to a maximum of Rs. 1 lakh in designated Equity Linked Savings Schemes (ELSS). Such investments have a compulsory lock in period of 3 years. ·        First time retail investors in equity with a gross total income of up to Rs. 12 lakh can invest up to Rs. 50,000 in specific MF schemes un...
Read more

Compared to Bank FDs, Debt Mutual Funds are more Tax-Efficient

It is a security vis-a-vis returns battle between bank fixed deposits and debt funds In the past few months, banks have been consistently increasing their rates of interest on different fixed deposits. And after the Reserve Bank of India's Annual Monetary Policy, even the saving deposit rates are up at 4 per cent. For a six-month fixed deposit, you can easily get a rate of anywhere between 6 and 7 per cent annually. However, experts feel if one is looking to invest for less than a year, debt funds could make a better choice. The reason: Liquid funds and ultra short-term funds are giving annualised returns of 8 per cent. Financial advisors suggest retail investors opt for mutual fund schemes as they are more flexible and give higher post-tax returns. Opt for fixed deposits only if you are comfortable being locked-in for the tenure as a premature exit can attract a penalty. If your main aim is to ensure liquidity, debt funds are preferable. Though a fixed deposit gives you a...
Read more

Reliance Health Total

  Reliance Life Insurance has launched Reliance Health Total, a non-linked, non-participating and non-variable health insurance plan . It provides a fixed benefit cover for hospitalisation, critical illnesses and surgeries. The customer can also make a claim for over-the-counter health-related expenses. This is a regular-pay, five-year plan that can be renewed till the age of 99. The plan comes with two options: customers can choose a higher medical reimbursement benefit or a higher sum insured. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - I...
Read more
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