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

Mutual Fund Exit Load Changes

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 Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Birla Sun Life Mutual Fund Launches Birla Sun Life NIFTY ETF

Birla Sun Life has launched a new fund namely, Birla Sun Life Nifty ETF, an open ended exchange traded fund. The new fund will be open for subscription from 4th July to 18th July 2011, at an offer price of Rs 10 per unit. The investment objective of the scheme is to generate returns that closely correspond to the total returns of securities as represented by S&P CNX Nifty, subject to tracking errors. No exit load will be charged under the scheme. The performance of the scheme will be benchmarked against S&P CNX Nifty and will be managed by Satyabrata Mohanty.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Birla Sunlife Mutual Funds: http://prajnacapital.blogspot.com/2011/...

Mutual Fund Reivew: Birla Sun Life Asset Allocation Conservative

Birla Sun Life Asset Allocation Conservative has numbers on its side to prove its credibility… Don't be surprised to find this Fund of Funds ( FoF ) in our recommendations. It has earned its place. And despite the difference in the structure of the product, there is no arguing with the numbers.   Of the total 6 years of its existence, the fund has been among the top 10 funds in its category in four of them. Last year it put up an average show and the only year it underperformed its peers was in 2008.   One aspect to look at when investing in an FoF is the expense ratio. The expense ratio of an FoF is capped at a lower limit of 0.75 per cent (2.50% for an actively managed fund). However, the FoF not only has its own expense (though lower) but even the expense ratio of the fund it is investing into. Fortunately, the fund manager takes that into account. "Expense is one of the important criteria used for fund selection and is the main reason for our investment in BSL Ind...

Short-Term Investment Options in Mutual Funds

Mutual funds offer liquid funds and ultra short term funds in the debt category, which are suitable for short investment periods. Ultra short-term funds were earlier known as liquid plus funds. Liquid funds invest in money market instruments with a maturity of 91 days or less. However, there are no such restrictions for ultra short-term funds. Who should invest in these? These are open-ended schemes. Investors with a short investment horizon or with surplus cash and low risk appetite should look at these. These could include corporate as well as retail investors. Those interested in staying invested for less than 15 days can opt for liquid funds. Retail investors who want to remain invested for two-four months, can look at ultra short-term funds. The short duration for both liquid and ultra short-term funds shields them from any interest rate volatility.   What kind of returns do they offer? In terms of an investment period less than 15 days, these funds are comparable to a ba...
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