Get the RIGHT MIX of Investments in your Portfolio

Understand the Science of Asset allocation:-

Every financial advisor aims at getting the right asset allocation for his/her client. 

Asset allocation is a technique through which a financial advisor balances the risk and reward quotients of your investment portfolio. For this, a financial advisor allocates your money into different asset classes such as equity (stocks, mutual funds, derivatives), fixed income (bonds, FDs etc), real estate, gold etc.

The logic is each of this asset class has different levels of return and risk. If the value of one asset appreciates at a point of time, the value of another asset may be depreciating at the same time. The impact of these asset-related fluctuations can be mitigated if you include more assets in your financial portfolio.

There is no standard rule for asset allocation. The percentage allocation of funds to various assets varies from individual to individual based on their age, goals and risk appetite.

However, there are some basic thumb-rules in asset allocation. In your early years, you may be advised to invest more in equities as you may have a higher risk appetite because of lesser financial responsibilities.

As you age, exposure to less riskier instruments such as FDs and bonds increases because your risk appetite lowers with higher age.

Hence it is crucial to get the right mix of investments in your portfolio to meet your growing needs and requirements.