Hello Readers!
Asset allocation a term that simply refers to spreading out of your investments into different types of instruments with varied risk and return structure that make your portfolio balanced.
Generally, for high returns, investors allocate their money in high-risk investments like Equity mutual funds and Equity shares for long-term. This allocation of your investment is considered essential for high return.
It often happens, while constructing our portfolio, we put our money in Equity allocation, but we do not even bother to think about the fixed income allocation in our portfolio. However, in order to construct a balanced and efficient portfolio, it is must for one to identify their fixed income allocation options and add them to their portfolio. A balanced portfolio helps you to maximize gains for your risk profile.
Here are six things that you may go adding to your portfolio as your fixed income allocation.
Deposits
Fixed deposits in various banks, that gives you a fixed return over a specific period, can be used as your fixed income allocation in portfolio. However, there is limit in Fixed deposits, premature withdrawal costs a kind of penalty. That means you have to keep your FD fixed till its investment period overs.
Bonds
There are various government bonds, tax-free bonds that can also act as your fixed income allocation. These are products which will give you a fixed return, again for a pre-determined fixed period.
Debt Mutual Funds
These are not same as Fixed deposits and government bonds that provide fixed return, but these products are fit for the portion of fixed income allocation in your portfolio. Debt funds have various types that have different investment strategy, so while adding debt fund as your fixed income allocation, do analyze their strategy. Debt funds with very short-term investment period like overnight funds and liquid funds can also be taken as you cash like allocation instead of fixed income allocation, as they offer good and market-specific returns.
Provident Funds
Both your PPF (Public Provident Fund) and EPF (Employment Provident Fund) can be taken as a part of the fixed income allocation in your portfolio. A large part of debt allocation is contributed by EPF; thus it is suggested while planning your retirement investment, first, calculate the amount that is being contributed by your provident funds and then add it to your portfolio. After that, you can allocate your assets efficiently for your retirement.
Small Savings
Small savings in instruments like NSC (National Saving Certificate), post office savings, and recurring deposits are products that can be a contribution to you fixed income allocation. They are usually smaller amounts but if you hold a few of them together, they can add up a prominent amount, thus ignoring them cannot be considered a good option.
Insurance Policies
If you have enrolled yourself with any kind of endowment policies, or ULIPs, that have a significant debt holding, then these all can be taken as your fixed income allocation.
As per experts having appropriate debt allocation or fixed income allocation in your portfolio, helps you make more space equity allocation that gives you more approach to long-term wealth creation.
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).