Nifty99000 100%

Sensex99000 100%

Exclusive

The Importance Of Asset Allocation

Author: Viral Bhatt/Wednesday, April 17, 2019/Categories: Exclusive

Rate this article:
No rating
The Importance Of Asset Allocation

There are a number of investment options for the discerning investor. You can choose from asset classes like equity, debt, property, commodities etc. With each type of investment, you have different risks and return probabilities. Of course, many people randomly make investments, or do so at the advice of friends and family, but this results in little or too much risk as the decision is not made after careful consideration. A better way to invest is to understand your own individual risk profile and carry out suitable asset allocation. Here is why this makes sense:

Understanding your risk profile: Your risk profile determines your willingness and ability to take investment risk. It is determined by reviewing your assets and liabilities, the number of dependants, the health of your savings and your preparedness for emergencies. Generally, there is a direct relationship between risk and reward; greater risk results in greater potential returns. A higher risk appetite may allow you to make more aggressive investments, which, in turn, may result in a possibility of higher returns. The converse is also true.

Achieve financial goals: Each person has different goals and ambitions in life. Some of these are short term goals like purchasing a new car or going on a dream vacation; others are longer off into the horizon like buying a new home or building a retirement nest egg. Asset allocation ensures that appropriate assets are selected for individual goals and allocated adequately towards the realisation of your future aspirations.

Manage risk: Asset allocation helps manage investment risk. Different assets are selected based on your risk profile in a rational manner. There is less danger of a portfolio becoming lopsided and heavy with one particular asset. This reduces sector and asset specific risks.

Asset allocation is a continuing process: Asset allocation is not simply a one-off process. Due to changing market and macro-economic conditions, assessment has to be made time and again about rebalancing and reallocating assets so as that the portfolio remains goal oriented.

Your advisor has a role to play: A good financial advisor like a certified financial planner has a role to play in asset allocation. They can help you with understanding your risk profile, realising your financial goals, explaining to you how asset allocation works and working with you continually so that your portfolio remains optimally allocated.

Asset allocation is a dynamic and evolving strategy to maintain a portfolio that is aligned with your financial goals.

The author is head of Money Mantra, a Mumbai-based financial advisory firm. He can be reached at viralbhatt@gmail.com

Print

Number of views (315)/Comments (0)

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free