Asset Allocation

noiembrie 23, 2017 | Autor: | Posted in Visual Graphic Arts

Asset Allocation is an important feature as far as the range of investing for any investor is concerned. It is extremely important to have a mixture of assets when you invest, because the best-performing asset varies from year to year and is not readily predictable.

Asset Allocation primarily involves categorizing an investment option among various asset categories that is offered. It could be in the form of a stock, fund or a share and the option that you choose is surely a self made decision that will decide the time you could go about tolerating the risk. Any major investment involves some amount of risk. It could be you come out thoroughly victorious, or it could be that you loose some amount of your investment or the complete amount. Here prior to investing it is advisable to get the complete market report on the asset you purchase or invest upon. Well if we overlook the negatives and focus on the positives then the reward for taking on risk is the potential for a greater investment return in the longer run. For short term investments it is advised that one tries cash investments.

By having an in-depth knowledge regarding the asset that the investor wishes to invest upon he becomes aware of the possible losses he could incur in case of a wrong initiation that he takes during the investment part. In case you invest on three primary assets then it is obvious that the returns from all the three assets would not be the same. You may garner high returns from one investment and loose out from the other couple of them and vice-versa. So it is always advisable to invest in more then one asset at a time so that the chances of an overall loss are avoided. In addition, asset allocation is important because it has a major impact on whether you will meet your financial goal. If you do not include enough risk in your portfolio, your investments may not earn a large enough return to meet your long time goal.

To choose and determine the asset you would want to invest in is not an easy option. So choosing three assets at a time is the entire more tough especially since it is a long term investment and you have to mix and handle them with emaculate maturity. It is here that two important factors creep up. A) Your time zone, ie the amount of time you intend to keep the investment and B) The Risk Factor, ie how far are you willing to go with your investment. The most common thing that takes place after you invest in assets is that you change them. This happens because once you near investment goals you need to re-arrange your strategies for another investment plan. On the other hand a matured investor does not change their investment strategies or their assets because over time some of your investments may become out of alignment with your investment goals. This is called Re-Balancing. It is all about bringing back your Assets in the original form just like the way you invested.

Most people would recommend to re-balance when the relative weight of an asset class fluctuates more than a certain percentage and is identified in advance. The Prime advantage that you get in this method is you have an idea as to when you should re-balance your assets and start all over with a new investment plan so that you again gain on in some profits.



Source by Ryan Crown

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