Asset Allocation and its Importance in Your Portfolio

4 years back, I wanted to lose fat & gain muscles. Someone told me that I needed to eat lots of vegetables & salads. I started eating it almost all the time. I lost weight but didn’t get muscles. Then someone said, Mohit you aren’t eating enough protein. Have lots of milk & milk products. I stopped eating salads & switched to Paneer Salads, Paneer Sandwiches & Chenna-based desserts. Unfortunately, results still did not come. After 3 years of struggle, I gave up.

At the beginning of the pandemic, I heard someone speak some Golden Words. “It is not one thing, it is a mix of everything.” I needed to REDUCE fried & packaged food, eat MORE Healthier food & finally do a bit of Body Weight training. In the lockdown, that’s what I did (although, missed quite a few times By the end of lockdown, I had managed to lose 7 kgs & gained quite a bit of muscle.

What did I learn? Whatever we like, we need to choose a mix of everything & it is never just one thing.

Similarly, for Investments, it is never straightforward. The best way for Wealth Creation & Achieving our Goals is to Invest in a variety of Assets.

In fact, one of the best ways to reduce our risk with investing money is to simply practice asset allocation. We can do this by investing in a wide range of assets such as FDs, Equities, and even Gold. We can do this either all by ourselves or the easiest way is – Invest in Mutual Funds that do the asset allocation for us.

Not only shall the fund manager be more disciplined, but he shall also make sure that if something does well, he moderates it.

Like in the lockdown, I might have missed doing exercise or eaten too much of something. But when we Invest in a Mutual Fund, discipline is there & we don’t miss out on something.

Indian mutual fund houses in order to address these needs have launched Asset Allocation Funds. Such funds help an investor to ride the asset waves and make meaningful gains to one’s portfolio.

Ultimately, it is the right mix, at the right time, in the right proportion that will give the investors like me… some well-needed muscle (progress towards our Goals).

Disclaimer: “Any views or opinions represented in this blog are personal and belong solely to the author and do not represent views of CFA Society India or those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated.”