Monsoon is never easy. Yet, we find ways to weather the rains. Remember to do that with your investments too with smart asset allocation.
All your investments are subject to risks, This is essentially the risk of a fall in value of However, the reasons behind the risks may be different for each asset. This is where you can play smart.
Since assets have different risks, you can invest across various assets. So when the value of one asset falls, the other assets in your portfolio continue to give returns! This is called diversification.
are inherently diversified. Every rupee you invest helps you buy thousands of Stocks or Bonds. All the Stocks and Bonds may not fall at the same time, thus lowering your overall risk.
The primary rule of diversification is to invest in assets that move in opposite directions. This means the assets are negatively correlated. Otherwise all your assets would fall at the same time, increasing your loss!
DEBT vs EQUITY
Most experts recommend that you have a mix of Debt aRd Equity Funds in your portfolio. This is because when Stocks fall, the Fixed Income assets like Bonds continue to pay returns.
When you're a beginner, it's not easy to know how much proportion should be invested in Equity and Debt Funds. This is why Balanced Funds are the preferred option. The Fund is already diversified across Equity and Debt.
Gold is considered a safe haven. Usually, when there is volatility in the financial markets, people move to Gold. This is why it's good to have a small portion of your portfolio in Gold Funds and ETFs. It pays off in times of trouble