Simple Rules Of Asset Allocation

Posted On Thursday, Mar 05, 2015


"Our job is, first and foremost, to make sure our family is whole."

- Michelle Obama


We live our life in phases. It starts with a phase where others give in to our demands, then there comes a phase when we take care of our demands and eventually we land up to a phase where we give in to others’ demands. Our family, our children, our parents or even our spouse.

How can we help ourselves to fulfill their demands and give them the best of life? Proper financial planning will help you reach your financial goals. May it be buying your own house, or children’s education, with proper planning and investment you can ensure you play your role successfully.

Many of you would have already planned your finances, but did you know how important is the role of asset allocation in your financial planning? Remember the key to long term wealth creation is having the right asset allocation strategy. Different asset classes can perform differently under similar market conditions.

Many of you might wonder: where to invest and how to design a right asset allocation strategy?

If you are married, and with young children
When you are blessed with children, securing their future becomes your prime responsibility. Children these days have their own wishes and ambitions and as a good parent, it becomes your responsibility to try and fulfill as many of those wishes. Expenses for education right from pre-school to schooling to higher education are growing much faster than regular inflation. Adequate investments are required to cover this. However you probably still have a good, long period of 10-15 years to invest and prepare for those goals. Hence, you can still invest more in equities in this phase. As you come closer to the goals you could transfer your equity investments to less ‘risky’ asset classes like liquid funds and also reduce allocation to equities.

Indicative Model Portfolio:
50-60% equity schemes, 15% gold ETFs and 25-35% debt funds.

If you are married, and with older children
This phase can be tougher to face. On one hand you have your children who are all grown up and waiting to take a leap towards the next stages of their lives and on the other hand you have your own future to take care of. Marriages and providing houses for children, etc. can become a great challenge in case you have not planned for it effectively. If investments in growth assets like shares and real estate are started early in life, and maintained, it would help ensure that the children enjoy the same life style as you did, when they set up their independent families.

At this stage your allocation to equities would be low. Some of the financial goals you planned for would already have been reached and the rest would be near. Fixed income investments like debt funds, FD would be more suitable for you.

Indicative Model Portfolio:
30-45% equity schemes, 15% gold ETFs and 40-55% debt funds.

If you are married, but with no kids
In these circumstances too, it becomes important to save for your retirement, but for both you and your spouse. Depending on whether your spouse is working or not will determine your asset allocation.

Indicative Model Portfolio:
50% equity schemes, 15% gold ETFs and 35% debt funds.

However remember in all the scenarios it is important to know that as you come close to meeting your financial goals you should transfer your money from equity to debt.

Therefore make sure you follow the simple rule of asset allocation prudently to ensure the happiness of your family. Also remember it is equally important to plan for your retirement as early as possible. You can also consult your financial advisor before making any investment related decisions.




Disclaimer, Statutory Details & Risk Factors:


The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.


Mutual fund investments are subject to market risks read all scheme related documents carefully.


Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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