How to select asset class to invest

POSTED BY Shreenarayanan ON September 25, 2010 1:59 pm COMMENTS (14)

Hi all,

How to choose which asset class to be invested at right time so tht we always be in profit no matter whether the stock market is up or down?

So help me in choosing right asset class at right time for investing

Regards,

Shree

14 replies on this article “How to select asset class to invest”

  1. Pardeep goel says:

    Asset Class category must be as per age. As our risk taking capacity is high in younger age and less in older age. One can go for Active Portfolio strategy for his asset allocation.

    e.g if one goes for 70% equity and 30% debt. then maintain it. If market goes up the equity valuation will go up. then sell the equity and buy debt to form same ratio again. and If market goes down and equity valuation will go down then sell debt and buy equity to make same ratio again. So in both the situation you are re balancing your asset allocation.

    Happy Investing!!!

  2. bharat shah says:

    regarding gold, i think, better we consider as most safe, most accepted, currency rather than investment avenue. and keep our half or more emergancy fund in gold etf, instead whole a/m in bank saving account/liquid mutual fund scheme. some financial advisers advise to keep 6 months’ to 2 years’ normal house expenses as emergancy fund before further asset allocation for investment in avenues as equity shares, bonds, commodities, real estate etc.

  3. marshaln says:

    @shree
    Yes it can help,
    But all depends upon individual risk appetite and knowledge 🙂

    Cheers
    Marshal

  4. marshaln says:

    @vijaya
    Lets say ram’s age is 30yrs so formula is
    100-30=70% in equites and 30% in debt
    Equites(direct, mf,index)
    Debt(ppf,FD,epf,nsc etc)

    Now if Mkt is up and equites exposure becomes 80% then move 10% to debt.. This way you are balancing your portfolios

    Having said that it also depends upon individual risk taking capacity and investment goals

    Marshal

    1. Shreenarayanan says:

      Hi marshaln,

      I hope balanced mutual fund will help in this case rt?

      Regards,
      Shree

  5. Vijaya says:

    Hi Marshaln,

    Can you please explain this formula!!!! it will be helpful for the newcomer like me.

    thks
    vijaya

  6. marshaln says:

    standard formula 100-age = equity
    in ups and down just make sure you keep adhere to above formula : )

  7. Shreenarayanan says:

    HI manickkam ,

    Thank you for your reply.I agree to wht you said and is true. My gold investment is related to paper gold(ie Gold ETF) and not ornamental gold.
    Please let me know any innputs?

    Regards,
    Shree

    1. manickkam says:

      Regarding the paper gold, it is also tracking the ornament and can have ups and downs. And considering its history, it can give good returns over the good return regardless of the timing you enter into it.

  8. Shreenarayanan says:

    Hi manish,

    Thank you fro your immediate reply.How abt gold as an asset class which everybody likes?

    Regards,
    Shree

    1. manickkam says:

      Even gold had gone down during its lean days. But, all of them would have already spent 10-12% more on making charges, VAT and all those stuff and consider it as investment and see it after decades.

      Any such investment, in equity, that long is assured to give profit.

      Without the timing, you can even take on the current index’s ETF (which most of them are worried as if its over-priced) and sit on it for more than 15 years and you will see the magic happening. Because of the liquidity and the volatility in the market, the urge to sell happens and most of them makes the bad decision and never come back to the market saying its a gamble!

    2. vipul rastogi says:

      Ur asset selection depends on a lot of important factors like ur age, risk appetite ,time horizon available for investing, ur present networth, ur future financial goals and needs. All these factors decide % of equity , debt and cash , and other assets. Once u have %age wise allocation in hand , then u should go for asset analysis and selection.Therefor u need to seek some competent professional help to help u to carry out this exercise. Always remember 90% returns depend on ur correct asset allocation.So it is very important.
      I would like to clarify one more point – In long term , equity has always outperformed debt or gold or any other asset.

  9. Shree

    If you want assurity of returns, then you cant invest in Equity , the lower the equity component in your portfolio , the lower the chances of volatility , So as you want 100% assurity and dont want it to be linked with markets,then you cant have equity , which is dangerous .

    Over a long term , you can have investments in equity class .

    You can invest in FD, PPF , Post office schemes or debt mutual funds if you want assurity

    Manish

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