There are three major asset classes that you can put your money into, namely equities, fixed income and money market instruments. In order to decide how much of your money goes into which investment class you must first consider a few important factors (most of these will be tackled by you during your goal definition phase):
Hence due to the variable nature of the investor’s finances and requirements there are no set strategies used by financial consultants. But we can provide you with broad strategies that you can adapt to meet you own needs.
But first please take a look at the chart below to see which category you broadly fall into. Investment protection leads to safer interest generating asset allocations where as Investment Growth leads to higher volatility assets, that may tend to grow over a period of time.
|Investor Characteristic||Investment Growth||Investment Protection|
|Future Income Requirements||Steady / High||Variable / Low|
|Volatility Limit (Risk Averseness)||Low||High|
|Inflation Protection||Low Protection Needed||High Protection Needed|
|Investor take on Equity Market||Mostly Bearish||Mostly Bullish|
If you are a person who broadly falls into the Investment Growth category you might be interested in looking at an Aggressive portfolio. On the other hand if you are leaning towards an interest income with minimal risk investments you might look at a Conservative asset allocation. Someone who wants a bit of steady income as well as asset growth might go in for a moderate or a balanced asset allocation.