You may have read about the importance of. This term refers to spreading out of your into different types of products which through their varied risk return structure make your balanced. You may have in shares, , deposits, real estate and so on. This spread out is essentially your .
While one is cognisant aboutallocation, given its risk profile, often we are not as meticulous in defining our fixed income allocation. However, in order to have an efficient and maximise gains for your risk level, it is important to identify your fixed income allocation accurately too.
Here are the six things you shouldn’t forget to include.
Bank fixed deposits and company deposits which give you a fixed return for a specified period, clearly belong in your fixed income allocation.
Non-convertible debenture, tax free bonds and otheralso are part of your fixed income exposure. These are products which will give you a fixed return, again for a pre-determined fixed period.
3. Debt funds
These don’t behave like your typical fixed income products, but belong in that portion of your portfolio allocation. Debt funds however, are of many types, you should be careful while assigning allocation. The very low maturity like overnight and may even form part of your cash like allocation rather than fixed income.
4. Provident Fund
Both your retirement linked , don’t forget that a large part of the debt allocation is already there in EPF. You can find out the balance and add this to your current and then decide the appropriate . Don’t make the mistake of lower amounts in , without considering this fixed income allocation.and what you (and your employer) are contributing to EPF need to be considered in the fixed income allocation. While planning your
These don’t behave like your typical fixed income products, but belong in that portion of your portfolio allocation. Debt funds however, are of many types, you should be careful while assigning allocation. The very low maturity debt funds like overnight funds and liquid funds may even form part of your cash like allocation rather than fixed income.
5. Small Savings
National savings certificate, post office savings and recurring deposits are all products that contribute to your fixed income allocation. These are usually smaller amounts, but if you hold a few they can add up to a significant figure. Hence, don’t ignore these.
If you hold endowment policies, money back policies orwith debt holdings then they all belong in your portfolio’s overall debt allocation. You must apportion the redemption amounts from these securities into your debt side too.
When you combine all these together you will realise that your natural long-term debt allocation is perhaps higher than you earlier accounted for. What this does is give you more space for allocating towhich enables you to have a better approach to long term wealth creation.