How to find the right asset allocation? MintGenie explains
investment portfolio. Asset allocation ensures diversification across assets and investments. Additionally, market fluctuations and the volatility of individual asset classes are common occurrences.
Diversification aids in levelling out these fluctuations in the overall value of your portfolio. Furthermore, it’s challenging to forecast which asset class will excel in a specific timeframe. Diversification guarantees that you’re not excessively dependent on the success of any individual investment or sector.
The following sums up the reasons for which investors must resort to asset allocation for better management of their investments. Balancing risk and reward: Through diversification across various asset classes, you can strive to strike a harmony between risk and potential rewards. Mitigating volatility: Different asset classes often exhibit diverse performance trends.
As one declines, another may rise, aiding in reducing the overall portfolio volatility. Matching investment objectives: Your asset allocation strategy should align with your investment objectives, risk tolerance, and time frame. For instance, an individual saving for retirement far into the future might favour a higher allocation to stocks for potentially higher returns, whereas someone approaching retirement might prioritize lower-risk bonds for income stability and capital preservation.
Exploring fundamental asset allocation models can serve as an excellent initial step for new-age investors. Selecting among various asset allocation models can indeed be daunting. Let's simplify it to make navigation easier: Conservative model (Low risk): This approach focuses on preserving capital and generating income.
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