Effective wealth creation: 4 points

Tue May 20 2014, 11:40 hrs
Asset allocation is the process of distributing an investor’s wealth among different asset classes. In other words, it is investing money in assets such as equity, bonds, real estate, precious metals and other commodities to ensure that your investments are well-diversified. (Photo: Thinkstock)
Asset allocation is the process of distributing an investor’s wealth among different asset classes. In other words, it is investing money in assets such as equity, bonds, real estate, precious metals and other commodities to ensure that your investments are well-diversified. (Photo: Thinkstock)
Reduces investment risk: A diversified portfolio is exposed to less risk as growth prospects are not limited to one security, but rather a basket of risky and non-risky securities across equity, debt, gold and real estate. (Photo: Thinkstock)
Reduces investment risk: A diversified portfolio is exposed to less risk as growth prospects are not limited to one security, but rather a basket of risky and non-risky securities across equity, debt, gold and real estate. (Photo: Thinkstock)
Less dependence on one asset class: Not all assets in a single asset class perform well at the same time. That’s why it’s important to choose different stocks and different categories of mutual funds. In fact, funds need to be allocated efficiently even within the category. (Photo: Thinkstock)
Less dependence on one asset class: Not all assets in a single asset class perform well at the same time. That’s why it’s important to choose different stocks and different categories of mutual funds. In fact, funds need to be allocated efficiently even within the category. (Photo: Thinkstock)
Hedge against volatility: Anybody who invested before or during the sub-prime crisis knows that when equities took a beating, debt and gold kept investors afloat. Those with pure equity portfolios are unlikely to repeat the mistake. A well-allocated portfolio will protect you, and even offer growth, during times of volatility. (Photo: Thinkstock)
Hedge against volatility: Anybody who invested before or during the sub-prime crisis knows that when equities took a beating, debt and gold kept investors afloat. Those with pure equity portfolios are unlikely to repeat the mistake. A well-allocated portfolio will protect you, and even offer growth, during times of volatility. (Photo: Thinkstock)
Freedom from market timing: Those who try to time the market can testify to its volatility. Imagine timing market movement across different asset classes. Investing minus stress is not very hard if you stop timing the market and implement a disciplined strategy. (Photo: Thinkstock; Text: P Saravanan)
Freedom from market timing: Those who try to time the market can testify to its volatility. Imagine timing market movement across different asset classes. Investing minus stress is not very hard if you stop timing the market and implement a disciplined strategy. (Photo: Thinkstock; Text: P Saravanan)
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