Beginner’s Guide on Asset Allocation

Beginner’s Guide on Asset Allocation

Each asset class has its own set of financial risks, and each has its own set of characteristics that influence market performance. Asset allocation is a crucial step in achieving your financial objective because asset classes rarely move in lockstep.

If there are two things that investment advisers and portfolio managers swear by, they have be portfolio diversification and asset allocation. Both strategies have stood the test of time to help generate wealth in the long term and reduce the impact of volatility. Although there are no formulas or short-cuts, asset allocation can help you create a fool-proof investment portfolio.

Eventually, you will develop an understanding of making immaculate buy and sell decisions and for selecting the perfect investments. However, before entering the complex market of investing and reaping benefits from it, you must have a thorough knowledge of asset allocation.

Let us understand the process of asset allocation, how it works, and what strategies you should use.

What is asset allocation?

Asset allocation acts as an investment strategy that sections your investment portfolio among different asset classes to balance the overall risks and benefits. The purpose is to minimise the risk of your investment portfolio even

as it captures growth opportunities from the market. A permutation of suitable assets with lower correlation is combined into a portfolio. This is done in such a way that should one asset experience a dip in market value, the portfolio is buoyed up by the other assets. What this does is that there is a balance of risk and return created in the portfolio. Additionally, age and risk-appropriate allocation of funds are done to different assets. This ensures that liquidity is maintained along with capital protection.

Each asset class functions differently. Therefore, your aim should be to allocate the assets in your portfolio according to your risk tolerance, investment horizon, and goals. Investment advisors at TejiMandi consider all these factors before coming up with a unique asset allocation strategy that best suits your profile. Do check out Teji Mandi Portfolios here.

Let us find out about the different types of asset classes in detail.

What are the different types of asset classes?

Some of the most popular asset classes for you to consider are: Equity Usually regarded as the riskiest of all major asset classes, equity (stocks and other equity-related instruments) offer the best growth potential. This is because the reward for high risk is a high return.

Stocks are overly volatile and hence very risky for short-term investments.

However, if you are in for a long period, inclined to ride out the volatile returns, then equity will give you greater yields.

Returns of equity are based on how they perform in the market. The performance is controlled by numerous economic, political, social, and other macroeconomic factors. This makes equity one of the most volatile asset classes in the market., But, if planned correctly, it can make wealth for you.

TejiMandi’s experienced investment advisors help you do this by investing in fundamentally strong stocks through their expert-curated portfolios with the best potential to generate returns. Read more about Beginner’s Guide on Asset Allocation