Asset Allocation

The Correct Asset Allocation for you:

There are 4 major assets where you can put your money i.e. Equity, Debt, Gold and Real Estate. Mostly Real Estate and gold is taken care by Indian due to their affinity to hold gold and Have Khud Ka Ghar. So we will mostly focus on other 2 ie. equity and Debt.
In order to decide the allocation of the funds in various asset classes , one must consider few factors as below.

1. Risk Appetite & Emotional Stability
2. Returns expected
3. Investable Amount (both present and in future)
4. Amount required for your Retirement
5. Age

Due to so many factors and that are also dynamic in nature no specific strategies are used by advisors. But they provide broad guidelines.

Below is the chart with gives the broad guideline and one can select into which catergory he/she falls into.

Investment Protection is low risk - low return strategy with less volatility

Investment Growth is medium risk - high return stategy with relatively higher volatility of assets.

Investment Protection Vs. Investment Growth

Investor Characteristic	Investment Growth	Investment Protection
Time Horizon	Short-term	Long-term
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 a person chooses Investment growth strategy than he might be interested in Aggressive portfolio with Higher allocation to equities / risky asset. It is called Aggressive Asset allocation.

On other hand if a person chooses Investment Protection strategy than he might be looking for interest income with very little or no risk hence can have higher allocation do debt instruments or liquid funds. This is called conservative asset allocation.

If someone is in between ie needs steady income with asset growth than he will have to go for balanced asset allocation.