The best asset mix you can opt for in the new Samvat year ahead
Asset allocation is important as it can insure a portfolio against volatility.
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Asset allocation is important, as it can insure a portfolio against volatility in any single asset class. “For a young risk-taking investor, the equity allocation can be 75-80 per cent of the portfolio, carefully distributed among largecap, midcap and smallcap stocks. Fixed income allocation can be 15-20 per cent, to provide some stability, whereas around 5 per cent of investment should be in gold,” said Ajit Mishra, Vice-President, Research, Religare Broking.
It is generally considered that equities outperform other asset classes in the long run. As per a recent study, in a 15-year tenure, equities delivered 9-12 per cent inflation-adjusted returns on investment, compared with 1-2 per cent for debt funds and 5 per cent on gold. Real estate delivered a -2.49 per cent inflation-adjusted return on investment in top seven Indian cities.
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However, just because equities outperform other does not mean investing in other classes is not important. “Gold offers decent returns. I don’t think gold should be avoided entirely. It may be 10 per cent or 20 per cent, but gold should be there,” said Amit Jeswani, Founder and CIO of Stallion Asset.
For those already invested, next one year will be the time tweak the portfolio a bit. “Over the next 12 months, asset allocation to both equities and fixed income instruments should be increased, while that for gold should be reduced,” said Gautam Shroff, Co-Head of Institutional Equities at Edelweiss Securities.
Some analysts are relatively conservative in their exposure to equities. Dharmesh Kant, Head of Retail Research at IndiaNivesh, thinks equities should form half of the investment, while 40 per cent of the portfolio should in fixed income and 10 per cent in gold.
Sandeep Raina, Senior Vice-President at Edelweiss Professional investor Research, had the most diversified asset allocation formula among all analysts ETMarkets.com spoke to.
He believes 20-25 per cent exposure should be in equities, and similar proportion in high yield instruments, while 10-15 per cent should be in gold and the rest in a combination of fixed income assets and real estate. He said investors should keep tweaking asset allocation plans as per the market cycle.