{"id":2943,"date":"2018-12-29T09:00:23","date_gmt":"2018-12-29T03:30:23","guid":{"rendered":"http:\/\/capitalante.com\/?p=2943"},"modified":"2019-02-19T10:09:26","modified_gmt":"2019-02-19T04:39:26","slug":"asset-allocation-strategy-in-easy-steps","status":"publish","type":"post","link":"https:\/\/capitalante.com\/asset-allocation-strategy-in-easy-steps\/","title":{"rendered":"Asset Allocation Strategy In Easy Steps"},"content":{"rendered":"<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">In the way of investment, the first term you need to understand is asset allocation. Asset allocation means diversification of your investment in different asset class i.e., equity, debt, bond etc. This is the most vital aspect of your investment strategy according to your risk profile and time horizon. There is a big basket of asset class namely gold, corporate bond, equity, government security etc. among which an individual has to choose. In fact, there is no fixed form of perfect asset allocation. You can consider certain factors such as your age, risk tolerance, time horizon to select the asset class where you can invest. In this context, we will guide you the asset allocation strategy among different asset class namely gold, bond, debt, equity, etc.<\/span><\/p>\n<ul>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Read also:<span style=\"color: #ff0000;\">\u00a0<a href=\"https:\/\/www.investopedia.com\/terms\/s\/strategicassetallocation.asp\" ping=\"\/url?sa=t&amp;source=web&amp;rct=j&amp;url=https:\/\/www.investopedia.com\/terms\/s\/strategicassetallocation.asp&amp;ved=2ahUKEwih6qzz0pfdAhWYT30KHbdfAtwQFjAMegQIBxAB\" style=\"color: #ff0000;\" target=\"_blank\" rel=\"noopener\">Strategic Asset Allocation &#8211; Investopedia<\/a><\/span><\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Read also:<span style=\"color: #ff0000;\">\u00a0<a href=\"https:\/\/www.moneycontrol.com\/news\/business\/mutual-funds\/4-investment-asset-allocation-strategies-to-create-wealth-2578451.html\" ping=\"\/url?sa=t&amp;source=web&amp;rct=j&amp;url=https:\/\/www.moneycontrol.com\/news\/business\/mutual-funds\/4-investment-asset-allocation-strategies-to-create-wealth-2578451.html&amp;ved=2ahUKEwih6qzz0pfdAhWYT30KHbdfAtwQFjANegQIARAB\" style=\"color: #ff0000;\" target=\"_blank\" rel=\"noopener\">4 investment asset allocation strategies to create wealth &#8211; Moneycontrol<\/a><\/span><\/span><\/li>\n<\/ul>\n<h6><span style=\"color: #0000ff;\"><strong><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\">What is asset allocation<\/span><\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">The asset allocation in different buckets enables you to manage or diversify the risk. Equity is such an asset class which has some moderate risk than the other asset class like the bond, debt securities. But historically, equity yields more returns over a long period of time. So, what will be your asset allocation irrespective of your age? A generally accepted trick is that you have to subtract your age from 100 to determine the percentage of your investment to the equity asset class.<\/span><\/p>\n<p><strong><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\">How to calculate perfect asset allocation strategy<\/span><\/strong><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Let\u2019s illustrate,<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Total value = 100<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Your age = 30.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">So, you may invest [100-30] = 70% of your fund or capital in equities or stock market. The remaining 30% of your fund can be divided between corporate bonds and debt securities. If your risk appetite is high, for better returns over a long period of time you can invest your 90% investment into equity or stock market before or on attaining the age of 30. Since you are young you can afford to wait and see for a long time. Therefore, any correction in the stock market may be a buying opportunity. Basically, the equity asset class has a record to yield more returns than any other asset class i.e., debt instruments over a long period of time.<\/span><\/p>\n<h6><strong><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\">Factors to consider while making The Asset Allocation Strategy<\/span><\/strong><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">In order to make a perfect asset allocation strategy, you need to\u00a0 consider\u00a0the following factors,<\/span><\/p>\n<ul>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Goals.<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Time horizon.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Let&#8217;s break down the above-mentioned factors,<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">You need to specify your goals either it is short term or long term because you have to decide your investment portfolio in accordance with your goals. Let&#8217;s make it clear with an example if you are of 25 years and planning for retirement then you have 35 years. in this case, you should invest in the equity asset class because the equity asset class outperformed all the asset class over the long term. but if you are planning for the purchase of four <g class=\"gr_ gr_101 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"101\" data-gr-id=\"101\">wheeler<\/g> within the next few years then you need to invest your corpus in debt instruments because in the short run stock market is quite volatile.<\/span><\/p>\n<h6><span style=\"color: #0000ff;\"><strong><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\">Why Time horizon matters?<\/span><\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">It is a proven fact that equity asset class gives better returns over the all asset class for a period of 15-20 years. In the year November 1995, the benchmark index Nifty 50 was trading at Rs. 1000\/-, now in January 2018 Nifty 50 is trading around Rs. 11000\/-. Since inception, the benchmark has delivered a compounded annual growth of return of 12%.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Just look at the following graph.<\/span><\/p>\n<p><a href=\"http:\/\/capitalante.com\/wp-content\/uploads\/2018\/11\/1.png\"><img loading=\"lazy\" src=\"http:\/\/capitalante.com\/wp-content\/uploads\/2018\/11\/1.png\" alt=\"Asset allocation strategy\" width=\"740\" height=\"399\" class=\"aligncenter size-full wp-image-3807\" srcset=\"https:\/\/capitalante.com\/wp-content\/uploads\/2018\/11\/1.png 740w, https:\/\/capitalante.com\/wp-content\/uploads\/2018\/11\/1-300x162.png 300w\" sizes=\"(max-width: 740px) 100vw, 740px\" \/><\/a><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">If you make a lump sum investment of Rs. 1 lakh at once and allow the money to compound at the rate of 15%, then you will get-<\/span><\/p>\n<ul>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">4 lakh after 10 years,<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">16 lakh after 20 years,<\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">66 lakh after 30 years.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Generally, many people lose money in the stock market due to many reasons the lack of patience is one of them. After making a proper analysis of any stock people choose and invest in good stocks, but after some time, they suffer loss. It is because <g class=\"gr_ gr_142 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar multiReplace\" id=\"142\" data-gr-id=\"142\">this kind<\/g> of people cannot have patience, they actually hurry to gain a huge profit from their investment. At least 2-3 years time should be spent on good stocks to find a profit.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">When stocks show correction of 20%-30%, impatient investors lose their control and sell the stock quickly at a lower price obviously making a loss. After some months, these stocks again trade on 40%-50% more from their initial price. These investors cannot even wait for 3-4 months. In the hard times of correction lack of patience or herd mentality subdues the intelligence.<\/span><\/p>\n<blockquote><p><span style=\"font-family: georgia, palatino, serif; font-size: 18pt; color: #0000ff;\"><em>&#8220;No matter how great the talent or efforts, some things just take time. You can&#8217;t produce a baby in one month by getting nine women pregnant.&#8221;<\/em><\/span><\/p><\/blockquote>\n<h6><strong><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\">What you will do when the market is volatile or witnessed sharp correction<\/span><\/strong><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">In order to make a profit in the stock market, you should buy more shares when the market witnessed a sharp correction because you got these stocks at an attractive valuation. Actually, volatility or sharp correction in the stock market is a buying opportunity for long-term investors.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">If you are confused about How to invest in the stock market and how to make money in the stock market, you may read the article\u00a0<\/span><span style=\"color: #ff0000;\"><a href=\"http:\/\/capitalante.com\/how-to-invest-in-the-stock-market\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\">How to invest in stock market<\/span><\/a>\u00a0<span style=\"background-color: #ffffff;\"><span style=\"color: #000000;\">&amp;<\/span><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000; background-color: #ffffff;\">\u00a0<\/span><\/span><a href=\"http:\/\/capitalante.com\/how-to-make-money-in-the-stock-market\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\">How to make money in stock market.<\/span><\/a><\/span><\/p>\n<h6><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\"><strong>By which route beginners can start investment i.e. direct equity or via equity mutual fund<\/strong><\/span><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">In order to make an investment in the stock market, the beginners have two options. The first option is to invest via direct equity by opening a demat account and the second one is via <g class=\"gr_ gr_131 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins replaceWithoutSep\" id=\"131\" data-gr-id=\"131\">mutual<\/g> fund. If you are confused which route you should follow to start <g class=\"gr_ gr_148 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling\" id=\"148\" data-gr-id=\"148\">investment<\/g> in the stock market, i.e. direct equity or mutual fund you may read the article<span style=\"color: #ff0000;\"> <a href=\"http:\/\/capitalante.com\/investing-in-equity-mutual-funds-versus-investing-in-stocks\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\"><strong><u>How you can invest, directly in equity or via mutual funds.<\/u><\/strong><\/a><\/span><\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">On the other hand, if you are of 55 years or above and have saved sufficient money for <g class=\"gr_ gr_130 gr-alert gr_gramm gr_inline_cards gr_run_anim Grammar only-ins replaceWithoutSep\" id=\"130\" data-gr-id=\"130\">happy<\/g> retirement life, you can adopt the strategy to simply confirm not to lose money. In this case, you may make your 100% investment into debt instruments which are less risky and earn a steady return of 8%-9% annually.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">While investing in the bond market you are left with various choices to invest. These bonds are corporate bonds, govt. bonds such as treasuries, municipal bonds etc. These bonds usually have a time horizon of 10 years, 20 years or even 25 years. At this point, you need to know that the total investment, as well as the interest income, will be credited at once and at the maturity. The interest earned is totally tax-free. An investor can not withdraw wholly or partially of his investment or interest gained in bonds. Before the investment, you need to consider the rating of the bond. This rating is given by several rating agencies like CRISIL, S &amp; P etc.<\/span><\/p>\n<p><a href=\"http:\/\/capitalante.com\/wp-content\/uploads\/2019\/01\/Top-10-Best-Mutual-funds-to-invest-in-India-for-long-term-2.png\"><img loading=\"lazy\" src=\"http:\/\/capitalante.com\/wp-content\/uploads\/2019\/01\/Top-10-Best-Mutual-funds-to-invest-in-India-for-long-term-2.png\" alt=\"Asset allocation strategy\" width=\"800\" height=\"2000\" class=\"aligncenter size-full wp-image-4378\" srcset=\"https:\/\/capitalante.com\/wp-content\/uploads\/2019\/01\/Top-10-Best-Mutual-funds-to-invest-in-India-for-long-term-2.png 800w, https:\/\/capitalante.com\/wp-content\/uploads\/2019\/01\/Top-10-Best-Mutual-funds-to-invest-in-India-for-long-term-2-120x300.png 120w, https:\/\/capitalante.com\/wp-content\/uploads\/2019\/01\/Top-10-Best-Mutual-funds-to-invest-in-India-for-long-term-2-768x1920.png 768w, https:\/\/capitalante.com\/wp-content\/uploads\/2019\/01\/Top-10-Best-Mutual-funds-to-invest-in-India-for-long-term-2-410x1024.png 410w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/a><\/p>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Read also:\u00a0<\/span><span style=\"color: #ff0000;\"><a href=\"http:\/\/capitalante.com\/5-points-to-consider-when-buying-corporate-bonds\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\"><span style=\"font-family: georgia, palatino, serif; font-size: 14pt;\">5 Points to consider when buying corporate bonds.<\/span><\/a><\/span><\/p>\n<h6><strong><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\">Finally,<\/span><\/strong><\/h6>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">You need to<span style=\"color: #ff0000;\"> <a href=\"http:\/\/capitalante.com\/how-to-manage-emergency-fund-step-by-step\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\">create an emergency fund<\/a>.<\/span> Try to accumulate enough money in this fund so that you can bear you all expenses i.e., foods, clothes, insurance bills, even your SIP installments for at least 6 months. <g class=\"gr_ gr_124 gr-alert gr_gramm gr_hide gr_inline_cards gr_run_anim Grammar only-del multiReplace replaceWithoutSep replaceWithoutSep\" id=\"124\" data-gr-id=\"124\">The ultra-short-term-fund<\/g> is the perfect place where you can park your emergency kitty. The ultra-short-term fund is offered by several mutual fund houses such as SBI Mutual Fund, HDFC Mutual Fund, and ICICI Mutual Fund etc. The fund invests in highly rated debt instruments, government securities that mature within a very short duration and have maintained a record to generate 8%-9% return over the past 10 years. The ultra-short-term funds can easily be redeemed in even weekends or Public holidays.<\/span><\/p>\n<ul>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Read also:\u00a0<span style=\"color: #ff0000;\"><strong style=\"color: #ff0000;\"><u><a href=\"http:\/\/capitalante.com\/how-to-invest-in-the-stock-market\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\">How to Invest in the Stock Market<\/a><\/u><\/strong><\/span><span style=\"color: #ff0000;\"><\/span><\/span><\/li>\n<li><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #000000;\">Read also:\u00a0<span style=\"color: #ff0000;\"><strong style=\"color: #ff0000;\"><u><a href=\"http:\/\/capitalante.com\/how-to-make-money-in-the-stock-market\/\" target=\"_blank\" style=\"color: #ff0000;\" rel=\"noopener\">How to make money in the Stock Market<\/a><\/u><\/strong><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-family: georgia, palatino, serif; font-size: 14pt; color: #0000ff;\">If you have any question regarding asset allocation strategy feel free to comment so that we have a discussion. If you found this post helpful don&#8217;t forget to share this post.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the way of investment, the first term you need to understand is asset allocation. Asset allocation means diversification of your investment in different asset class i.e., equity, debt, bond etc. This is the most vital aspect of your investment &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Asset Allocation Strategy In Easy Steps\" class=\"read-more button\" href=\"https:\/\/capitalante.com\/asset-allocation-strategy-in-easy-steps\/#more-2943\">Continue Reading<span class=\"screen-reader-text\">Asset Allocation Strategy In Easy Steps<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":4155,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[110],"tags":[],"_links":{"self":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/posts\/2943"}],"collection":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/comments?post=2943"}],"version-history":[{"count":0,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/posts\/2943\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/media\/4155"}],"wp:attachment":[{"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/media?parent=2943"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/categories?post=2943"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/capitalante.com\/wp-json\/wp\/v2\/tags?post=2943"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}