Hello Readers! 

When any individual plans investing in Mutual Funds, they are often advised by the mutual fund advisers, to go diversifying their mutual fund portfolio. This is suggested so that investors can reduce or minimize the risk from their portfolio and enhance the returns from their investment.

Well, do you know, that diversification occurs somewhere before we do it in mutual fund investing. Individuals have their asset allocation at many places like an investment in property, gold, and some financial securities like fixed deposits and mutual funds. Yes, while allocating their asset individual often go diversifying it, and this happens automatically without making any choices.

But here the point is, this diversification in your assets allocation won’t work for your financial needs, unless and until this diversification have some calculated choices.

For example: Suppose you invested in a property, and considered this as an investment for your retirement, but now when you are to retire, you are finding it difficult to sell this, because of both property prices and demand on a downtrend?

Managing your investments for your goals and objectives requires some thought to be given to asset allocation and diversification. Here are two points that you can consider, while selecting the best that suits your goals.

GIVE PRIORITY TO YOUR GOALS

While diversifying your asset allocation, give priority to your goals. For your long-term goals, which are over 7 years away, you can add Equity Growth mutual funds in your portfolio. And at the time when you are near reaching your goal say 1 year nearly, switch to some stable returns like debt funds.

You should know the difference before you choose real estate as your investment for retirement. Real estate is not as liquid as equity investments. It may happen that when you need to sell them, you get caught in a bad market cycle, in that case, you won’t be able to sell your real estate investments at the price or time you desire. On the other hand, Equity mutual funds are flexible in nature and easy to exit.

For your short-term goals, which are to be achieved in less than five years, you must look towards some stable investment. You can allocate your funds in short-term debt funds, remaining invested in these funds for over three years will also bring about greater tax efficiency.

For your very short-term goals, which are to be achieved in one year or less, you can consider allocating your funds in debt and money market funds like Ultra Short Term and Liquid Funds. Some liquid funds even offer immediate redemption up to a limited amount.

LIFE STAGE ALLOCATION 

Investors in their young age are more capable of taking risks in their investment, as they have most of their earning years ahead of them. Hence, mostly they are suggested to have an investment portfolio inclined to growth assets which can get volatile in the short term but beat inflation in the long run. Also, the long term investment will help them ignore the near term ups and downs in the investment value.

Investors when they near to reach their retirement, look more towards stable investment with very less or no amount of risk. They generally look towards converting their income from investment into their professional income. Thus, for retirees, it is suggested to increase their allocation in debt-oriented investments, but at the same time, they are also suggested not to come out completely of Equity investments. Some equity allocation needs to remain to work on combating inflation post-retirement.

A planned and balance investment journey comes when you have the diversification with the right asset class, which acts as a key in achieving your financial goal or objective.

For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).