1. Sensible asset allocation is the most significant investment decision made by an investor, as it aligns his assets to his goals by keeping the risk, return and liquidity needs in mind.
2. It involves 3 vital questions to be answered by the investor for each asset:-
a) Why do I need the asset?
b) How much should I hold?
c) For how long should I hold?
3. Asset allocation is not about chasing the highest return, as different assets do well in different phases of an economic cycle - with no perfect prediction.
4. Instead, it's about lowering risk - by not betting too much on one asset.
5. Therefore, the core task of investing in a sensible asset allocation is focusing on yourself, your income, your savings, your investments and your needs and goals.
2. It involves 3 vital questions to be answered by the investor for each asset:-
a) Why do I need the asset?
b) How much should I hold?
c) For how long should I hold?
3. Asset allocation is not about chasing the highest return, as different assets do well in different phases of an economic cycle - with no perfect prediction.
4. Instead, it's about lowering risk - by not betting too much on one asset.
5. Therefore, the core task of investing in a sensible asset allocation is focusing on yourself, your income, your savings, your investments and your needs and goals.