Colours play an important role in our lives. From the Greens of the trees and Browns of the earth to the Blues and Whites of the skies, nature itself is a spectrum of colours. Consequently, our association with them is often deeper than we realise – to the extent that colours have the power to affect our moods. From a calming Blue to an authoritative Black, our lives, in a way, are a sum of colours, and just as we seek harmony in everything we do, so also must the colours be balanced.
Financial solutions are no different. The choices range from risk-averse debt to higher-risk unlisted equity. These have the power to stabilise your portfolio and/or provide the necessary growth. The right solution depends on the macro environment, your personal preferences and goals; which, like colours, must also be balanced.
Planning for wealth requires understanding of the asset allocation practice.
Asset Allocation is the process of deciding how to distribute wealth among various asset classes and sectors. Although often regarded as a minor investment decision, asset allocation is the cornerstone on which the entire investment process is built.
About 90% of return variability over time can be explained by asset allocation decisions. About 40% of the differences in returns can be explained by differences in asset allocation. Asset allocation is thus the major factor that drives portfolio risk and return. Asset classes have fluctuating returns and correlations over different time horizons. No one asset class tends to outperform others consistently, therefore it is critical to diversify and adapt your portfolio to the dynamic investment climate.
Therefore it is important that one must spread his asset across equity, debt, structured products, private equity, real estate and other alternates as well.
Asset Class Performance
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