Asset Allocation to Tide over Volatility
The importance of risk management should always take priority over returns in the investment world. It helps you to earn better risk-adjusted returns in the long run. This becomes even more important in volatile times like now. It is akin to driving slow when there is fog or snow that helps us to mitigate the risk of an accident and you safely reach your destination. Risk to your investments can come from various factors out of which you might know of some while you may be ignorant of others. We are in an environment where there are a lot of unknown unknowns. In this scenario, proper asset allocation will help you to tide over this difficult situation.
Empirically it has been seen that a portfolio with proper asset allocation, which means investing in different asset categories including equity, debt, commodities and cash, has generated better risk-adjusted returns. Investors, and especially first time mutual fund investors with moderate risk, should invest in a mix of equity and debt to meet their long-term financial goals. This will help you to achieve your goals with lower volatility in your portfolio. Recognising the situation, our mutual fund recommendation in this issue is a hybrid fund that has invested in equity, debt and cash.
Our cover story this time will help you to make sense of recent changes introduced by the capital market regulator for Portfolio Management Service (PMS). The story will help you to choose a product that suits your risk appetite and investment goals. We are also carrying a special report on timeshare holidays. This is compared with investments in mutual fund and using it to plan your vacation. The story gives you an arithmetic sense of whether you should write a cheque in their favour after going through their detailed presentation. I believe the stories in the issue will help you to make informed and better decisions. We will be more than happy to receive your feedback and suggestions about our choice of topics.
SHASHIKANT