Asset Allocation Principles Asset Allocation can contribute to your financial prosperity in a big way. It is the first step of adding value to your money or putting your money to good use. Asset allocation is the percentage distribution of your money into equity, debt and liquid instruments. • Equity, as you know, gives the highest growth but comes with the highest risk. • Debt instruments are more or less guaranteed but gives you less returns. • Liquid money is your money in your savings account. Studies have pointed out that the asset allocation decision is more important than the process of choosing the actual stocks, funds and even market timing. Rule of Thumb Your allocation to debt should be equal to your age. And as your age, the percentage in debt should increase too. In other words, your investments in equity should be: (100 - your age). So if you are 30, the thumb rule tells you to invest 30% in debt and 70% in equity. But remember to check your risk profile to arrive at a personal asset allocation decision.
Posted on: Mon, 19 Aug 2013 18:01:03 +0000
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