6 Ways to Optimise Your Asset Allocation
Align your portfolio as per your risk profile
Your investments have to be aligned as per your risk profile. Many individuals end up with portfolios that have an undue bias towards a single asset class. This may lead to gross under-performance of your portfolio and an increase in associated risks.
Monitoring your asset allocation periodically
Often, individuals do not monitor their portfolio periodically, this may lead to holding on to underperforming or non-performing assets over the long haul. By periodically looking at your money grow, you will find motivation in staying committed to your investment objective.
Tactical and strategic reallocation
Mere monitoring of the portfolio is insufficient, one has to review the portfolio to assess if there is a requirement for any tactical or strategic reallocation.
Optimising returns and minimising risk
The focus of optimising your asset allocation is to increase your returns and minimise your risk. Either of these factors should not be looked at in isolation. The asset allocation should always align with your financial goals. This will ensure the seamless achievement of your financial goals as per your timelines.
Taking informed decisions
Investment decisions have to be taken after procuring the required knowledge about the asset class. The risk-return metrics have to be appropriately evaluated to ascertain if they align with your risk profile and fall in line with your financial goals.
Hedge your risk
Asset allocation is an exercise to reduce risk, the two most obvious risks that we face are life risk and health risk. Health insurance is considered merely as a hedge, however, within life insurance, multiple variants offer the dual benefit of term cover and investment.
Optimised asset allocation is a continuous process, which requires continuous monitoring, review and reallocation.
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