Asset allocation is essential for investors to achieve long term financial success. Any investor who seeks to increase his returns, protect his investment from specific risks, and maximize his wealth, must exercise prudent asset allocation strategies.
So, what exactly is asset allocation? It refers to the process of dividing one’s investments across various asset classes (eg. cash/FD, property, unit trusts, shares). Depending on factors such as age and level of risk tolerance, different people may have different asset allocation strategies.
For example, a person who is closer to retirement age would usually contribute less of his capital to high-risk assets. A young entrepreneur, on the other hand, could be the exact opposite. Because different classes of assets react differently to changing market conditions, thus proper asset allocation allows you to manage the ups and downs of the financial market over the long run.
How to Determine the Right Asset Allocation for Yourself?