Asset Allocation Is The Art Of Alignment

Asset allocation is a process of dividing one’s investments among different asset classes such as stocks, bonds, cash, real estate, etc. in such a manner that you can reach your desired financial goals by keeping in mind your age, risk profile, etc. Different asset classes have different trajectories and needs. Cash or fixed deposits can be used to meet very short-term goals but cannot be used to meet long-term goals like a child’s education, retirement, etc. For those, you would require asset classes such as equities, different types of mutual funds, and others, which might be volatile in the short term but generate real returns (above inflation) in the long run to meet such inflation-heavy goals. Therefore, it’s important to spread your risk across different asset classes and get a decent risk-adjusted return. Putting many eggs in one basket is risky and the least...