Any conference holding importance centers the young generations nowadays as they are believed not only to be the major contributors of the Gross Domestic Product of India but also the current and future leaders of the nation. Now they are the young guns of India, and in future, they will be the major population of India. When they have their own families, they will need finance for various things. Inflation seems to be on the rise always. How do they keep sufficient funds for their retired life, when the prices are much higher? Don’t get worked up, yet. We have an answer for you.
Asset Allocation strategy is an essential concept. In other words, diversifying your investment portfolio with the right mix of Mutual Funds (MF), Stocks and Shares, Fixed Deposits (FD), Real Estate Investment and so on is necessary. A good asset allocation strategy ensures that your portfolio helps you meet your financial goals without much stress (or) risk. You invest all your assets into your investment portfolio. This strikes a balance between the risks and your rewards by linking it to your risk-taking and financial objectives.
Seetha asks “Why is asset allocation crucial?”
Geetha says “The intent of asset allocation strategy is to get you a return on your investments as and when you manage the risk inherent in any investment option. Every asset has an embryonic risk. There is always a market risk with any investment. There is no way you can obliterate this risk with respect to any investment product and in order to beat inflation, you cannot keep your money in your savings account idle. To mitigate the huge risk of investing and getting exposed to the risk, asset allocation strategy will help you reduce those risks. A smart asset allocation will help you to evade risks.”
“How long do I need for investing?” questions Seetha.
Age plays a vital role in deciding your portfolio and asset allocation. A young man or woman in his/her 20’s has more time so can take risks and invest more. A 25 Years old can withstand risks better than, say 70 years old. In your 20’s you have thirty years to invest money before you require all that finance for your retirement life. As you grow older, your time to grow money will reduce so this is why a younger person can bear a large risk. The younger you are, the better as you can create more wealth.”
“Follow this illustration. 100-your age=stock investments. If you are 21, then 100-21=79. So you need to invest 79% in stock markets.” Geetha proceeds, “This formula might appear to oversimplify the concept but trust me and see the positive aspect of it which is the conceptualization that your asset allocation must change as you grow older. For young investors like you and me who are in their 20’s, there are lesser chances of having more liabilities. Hence it is better to invest in higher returns generating products to beat inflation and create wealth over a long period of time.”
“Wow, Geetha you are aware of so many things! I admire you!! Where did you get all this information from?” Seetha asked out of curiosity.
“I got this information from moneymindz.com and you can even give a missed call to this number.
The company will contact you and you can ask for further details.”