Asset allocation is an investment strategy that aims to balance the risk and growth associated with investment schemes. It balances the risk and growth by allocating the total investment among different asset classes. These asset classes differ in terms of the category of risk and returns
Asset allocation helps an investor in reducing or rather managing the risk better. This is achieved through diversification of his or her fund into different assets with different risk levels. For instance, An investor invests in equity funds as well as liquid funds. Now with equity funds being more volatile, liquid funds can help balance, when the market acts wildly and becomes too volatile
An asset class is a grouping of different investment instruments that show similar characteristics. These investments in an asset class tend to act in a similar manner in comparison to other investments.
There are three major asset classes namely:
The recent trend is to also include investments like futures and options, commodities, cryptocurrencies into an asset class or mix
Strategic asset allocation is a portfolio distribution and management strategy. In other words, an investor sets a target allocation for different classes and rebalances the portfolio.
The target allocation is based on his or her:
While rebalancing of the portfolio is done when the asset’s performance deviates from the expected behavior.
<span style="font-weight: 400;">While thinking about investing in mutual funds, the first thought you might have in mind is the complexity of jargon related to mutual funds. As an investor, you would find mutual funds are a great way to invest your wealth. But understanding the offering behind these financial products is crucial and recommended for an investor. </span> <span style="font-weight: 400;">Mutual funds are professionally managed by experts, these esports help you create and manage wealth. Mutual funds come with a flexibility to buy, transfer or redeem, mix, churn very conveniently. </span> <span style="font-weight: 400;">When you visit any Asset Management Company’s website, you might come across many terms. These terms might not be familiar to you because we don’t usually use them in our daily. So, we have come up with a glossary of mutual terms to help you understand the world of mutual funds.</span>