Asset Allocation: Don’t put all your Eggs in one basket

Asset Allocation: Don’t put all your Eggs in one basket

Investing comes with its own risk that no matter a big or a small investor must invest time in managing. One way you can do it is by investing your money across different platforms. There is a plethora of option for asset allocation, some of the most well-known being bonds, cash, real-estate, precious metals, and commodities. You can also go for equity.

Each investment in asset allocation comes with its own set of risks and benefits and fetches you return under different circumstances. As it is not sure how sure how one investment mechanism will perform, it is never safe to put all your money under one belt or just into one asset class.

Suppose you invest all your money in purchasing the shares of a particular firm and if that particular firm ceases to perform you will end up losing all your hard-earned money. This is the reason why investing money in different plans is a good idea. Although no formula for asset allocation comes with 100% proven results, it is better to allocate your resources in different places.

Here are some tips that are intended to help you in allocating your funds properly.

1. Determine the right mix of assets for you:

The right mix is not a static one and depends on your financial goals. There are two main factors that decide how you should do your asset allocation:

  • Duration of asset allocation or how long do you want to remain invested?
  • Your willingness to take risks.

The more time you remain invested in a particular firm, less prone you are to daily ups and downs. It also allows you to take more risks as you aim at the long-term profits rather than short-term losses.  High risks come with the promise of high-yield.

2. Diversify within and among asset categories:

You can look within a particular category and find the best options to put your money on. You can diversify your investment in a number of individual stocks in a wide range of industries and sectors. Most investors like to play safely while others are in the search of the next big thing. A mix of both risk and assurance can prove good for your asset allocation again depending on your time constraints and risks taken.

3. Revisit again and again to check the balance:

You might feel the need to change the asset allocation of your resources from time to time. This can be a result of a change in your financial goals, your living conditions, and your time allocation. Shifting your investment periodically also protects you from keep putting your money in affirm that is performing low and might not provide returns as expected.  You can always go for financial advice before making any changes to your asset allocation.

4. Keep a close look at your actively managed funds:

The best places to invest your money are mutual funds that invest your fund into the variety of projects. If you don’t possess enough knowledge and expertise to maintain your portfolio, try approaching investment houses that have a solid reputation. Exchange traded funds are another good option to invest in. All you need to do is find a fund that suits your asset allocation goals and time constraints.

These were few ways to help you out with the correct asset allocation and always remember the good old saying “Don’t put all your eggs in one basket”.

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