IS AN ASSET ALLOCATION NECESSARY?

• A carefully chosen asset allocation strategy is the key to setting up a sound financial base.
• Clearly define your goals because you can achieve them only when you know what they are.
• This has a direct impact on deciding the route you choose to achieve them.
• The approach for achieving a short-term goal will be totally different than for a long-term goal.
• Dividing your investible surplus among asset classes should depend on your risk appetite.
• Ensure you invest in products that match your risk-taking ability, and dig deeper to understand the possible risks that you may be taking to achieve a specific goal.
• The time horizon for achieving a goal also needs to be taken into consideration.
• This implies that the sooner you need your money, the wiser it is to keep it in investments that have a comparatively higher liquidity with least losses.
• Also, you should consider the market forces and the effects of their volatility while allocating your surplus money, for maximizing your chances of good returns in the long term.
• And yes, your emergency fund, being a short-term goal perennially, will be counted in the asset allocation as it would also be in the form of an invested product.