How asset allocation helps you balance risk and returns – CNBC tv18

How asset allocation helps you balance risk and returns – CNBC tv18



Investment is not just about choosing the right stock or obtaining high fixed deposit returns. This is about balanced and return to the risk. Assets allocation – Investments investing in equity, loan, gold and real estate – HELPS investors manage market volatility, ensuring stable growth.

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Naveen KR, a smallcase manager and senior director of Windmill Capital, says, “A well diverse portfolio protects purchasing power against inflation, reduces risks, and provides frequent returns.”

Traditional investment such as FD and RD provides stable returns but often fails to remain with inflation, erasing real money.

Diversity in asset classes helps to combat this issue.

For example, equities have historically given inflation-beating returns in long-term, while fixed-incredes instruments provide stability. By spreading investment in asset classes, investors can achieve growth by reducing risks, ensuring that their portfolio is ahead of inflation. Relying too much on any single property, “Naveen says.

Ensure stability in market cycles

Investors often struggle over market time, try to buy at the lowest points and sell at the highest. But this approach is also difficult for experienced investors.

It is suggested to focus on asset allocation rather than Naveen.

“Instead of giving time to the market, the asset focus on the balance balance,” they say. “Distributing investment in asset classes smooth the impact of market volatility.”

For example, when the equity experiences dradown, fixed income or gold investment can provide stability, cushing the overall portfolio.

He said, “This strategy ensures a smooth withdrawal trajectory in market cycles, align with long -term financial goals and reduces the stress of the market high and climbing,” they say.

Why ETF is gaining popularity

ETFs have become a popular investment option due to their low cost, liquidity and diversification benefits.

“Unlike ETF mutual funds, trading in real -time on the market, which work based on the end NAV,” Naveen states. “This flexibility makes investors more attractive to ETFs who want more control over their investment.”

Another profit of ETF is cost-effectiveness.

“Actively managed mutual funds increase high cost due to management fees, while ETFs, which repeat most indices, offer low -cost options,” they say.

ETFs also provide immediate diversification. A Nifty 50 ETF, for example, gives exposure to all 50 companies within the index, while direct stock investment focuses the risk on individual companies.

Avoiding mistakes of common property allocation

Many investors fall into the common trap when allotted their assets.

“One of the greatest mistakes is pursuing the previous performance, allocating greatly for high performance assets recently without considering risks,” Naveen has warned.

Another mistake fails to review and recreate the portfolio. If someone has initially set an allocation of 80:20 between equity and gold, periodic evaluation is important to maintain that balance.

Emotional decision making can also hurt investors

“The sale of nervousness during the recession or overgrowth is common errors during the steps of the recession,” he said.

To avoid these losses, new advice:

  • Setting clear financial goals and risk tolerance before investing.
  • Adopting a disciplined approach to diversification and rebellion.
  • Instead of reacting to short -term market movements, focusing on long -term strategies.
  • Seek professional advice if needed.

Management of market instability without avoiding equity

Market instability is a major concern for investors, but is not a complete solution to avoid equity.

“It is about balance to reduce risks while in contact with equities. In Windmill Capital, we have created asset allocation-based smallcase to suit different requirements. Some of these smallcases focus purely on ETFs , Offer diverse risk at low cost. There are other equity- but dynamically adjust the allocation, transferred to debt and gold during the period of instability.

(Tagstotranslet) Asset Allocation (T) Asset Allocation Strategy (T) Investments (T) Equity Investments (T) Date Market (T) Fixed Deposits (T) Fixed Deposits (T) Recurring Deposit (T) Asset Allocation Risk (T) Investments