What are the benefits of asset allocation?

When we run a business, we prefer to invest our money to get some balanced returns. The business needs to build a portfolio that creates a proper balance between risk and reward. The financial professionals in the business think that asset allocation is very important. Know that there are three main asset classes- equities, fixed-income and cash and cash equivalents. All these have different levels of risks and returns, so a loss in one may be covered by the returns in another.

In simpler terms, asset allocation means distributing your investments in equity, debt, gold, real estate, etc. It is kind of bringing in diversification in investments, making sure that the whole investment does not get lost in a single go. To know about types of asset allocation, follow the following points:

If we deeply sink into the term asset allocation and diversification, asset allocation is done based on income flow, age, investment needs etc whereas diversification is a strategy to allocate the funds to earn more rewards and reduce risks. Also, know that while diversifying, one must have an understanding of proper holding and selling of the investments.

Following are some of the benefits of asset allocation and diversification:

So aboveare some of the benefits of asset allocation and diversification. Determining the right mix of investments is essential to increase returns and reduce risks. Many factors affect the asset allocation decision. Some of the common factors are personal financial goals, risk appetite, investment horizon and much more. Some of the factors are explained below:

So above are some of the factors which might affect the asset allocation and diversification decision. If you are looking for some investments, you can visit ‘Wealth Desk’ as they will guide you to invest in a basket of stocks and ETFs based on your idea and strategy.

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