In the recent slip in stock market, many investors have forfeit their precious savings (capital). Most of them are the investors who started purchasing stock exchange a couple of months or years before. These investors have suffered huge loss due to imbalance in Asset Allocation. It is to be noted that Asset allocation is a vital tool in achieving financial balance and mental peace. You ought to be very clear in mind, about one's risk bearing capacity and time horizon (investing for short term or investing for very long term), then decide how much percentage of your savings (money readily available for investment) should you allocate for equity and how much percentage for debt. As a thumb rule, equity percentage in portfolio should be 100 without the age of investor. Suppose you're 4 decades old, your equity investments (purchase of share market) shouldn't be more than 60% (100 - 40 = 60%), However this percentage may vary from investor to investor depending his / her age, income, liabilities, future plans and Risk bearing capacity. Mr. Quick started purchasing the stock market, some two years ago. He is really a government employee and that he used keep his surplus as bank deposits. One of his friends suggested him to get some money in share market. Accordingly, Mr. Quick did it, with in few months he got about 80% to 90% rise in the costs of stocks in which he invested. Slowly he soon started taking out money from his Bank deposit, provident fund and invested everything in equity stocks. All of sudden when stock market crashed, his entire investment a break down huge loss. If Mr. Quick would follow the basic rules of investing, and a balanced debt - equity ratio, his loss could have been minimum, and on the crashing down of equity stock market, his Bank deposit, Bonds (purchase of debt securities) etc. would provide him a great cushion. In its broadest sense, an investment is really a sacrifice of current money or other helpful information on future benefits, therefore goal of investment ought to be clear. You should ascertain neglect the objectives, and make it clear, when the investment is being made, (a) for income, (b) for growth / appreciation or (c) for safety. It makes no difference, whatever equity holdings inside your portfolio represent, whether 10 percent, 40 percent or 80 percent according to your asset allocation strategy, but important thing is you must make some fundamental exercise, i.e what sort of investor you are, what is your risk bearing capacity, time horizon for investment and the kind of investments that will fulfill your requirements. The two aspects of investment are Some time and RISK. The sacrifice of the current money, as investment, happens now and is certain, whereas the benefit (returns) is anticipated later on and tends to be uncertain. Therefore avenues of investment create a sense here. Numerous avenues of investment can be found today, like Bank deposit, mailbox Deposits, Private company's deposit, Provident fund deposit, Equity shares, bonds, Mutual funds schemes, Life policies, Property, Precious objects (gold, silver, diamond, art objects, antiques) etc. Thus, invest for any better future, not for quick money and Never break the fundamental rules of investing.
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In the recent fall down in stock market, many investors have forfeit their hard earned savings (capital). Most of them are the investors who started investing in stock exchange a few months or years before. These investors have suffered huge loss due to imbalance in Asset Allocation.
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