A very happy and successful 2020! The new year bring new challenges and opportunities. This holds when planning to build a financial safety net for the future. Often, we are faced with questions such as, Why diversify? Why debt schemes? Why not Gold and real estate? These are valid questions and to answer some of these, we give below the “Asset Allocation Quilt” researched and developed by the Mint.
The quilt traces back the performance of asset classes over a decade. The worst performing asset classes are at the bottom of the table while the best-performing ones are at the top of the table.
Debates have and will continue to take place when it comes to defending a specific method of asset allocation. Presentation of past returns that justifies investment decision making, are inaccurate, often drowns the message of diversification.
The data is quite clear:-
a) Past returns by no means justify a case for future investment decisions. A well-diversified portfolio across equity-debt-international would have performed better.
b) No asset class is the winner always. Being over-weight can cost you a lot, even your capital.
c) Diversification is a MUST when building a financial plan. Predicting which asset class will outperform is impossible. Diversification can give you the spread you will want to play improving returns.
To look beyond returns is not easy. After all, one invests to create wealth. Yet, if you stayed away from specific strategies, for example, International funds, fixed income solutions, you would have missed the boat. Further, there is no correlation between the broad spectrum of investment strategies be it commodities (Gold), Fixed income (Corporate debt &Gsec) and Equity (Domestic & International).
The key to investing, therefore, is (a) to have a well-diversified portfolio based on your risk profile (b) to invest for the longterm. At PHUNDO, we help build your financial portfolio to position both these key success parameters in mind. SELECT INVEST RELAX the Phundoway!
Mutual funds are subject to market risks. Please read the offer document and contact your advisor before investing