Amid global tensions, how an all-in-one investment approach shines through

Diversifying or investing in a variety of asset classes is the right step towards a sound investment plan. However, preference for a particular asset due to changing market conditions, fluctuating interest rates and other factors like inflation is a natural occurrence.

But over time, your portfolio should also change. An all-in-one investment approach can be a wise move. Based on your risk-return profile, time horizon and investment goals, try to create a portfolio that is not biased towards any one asset class.

Experts believe that the majority of portfolio volatility can be managed through asset allocation instead of looking for an asset class – stocks, debt or gold. However, overexposure to a given asset class may also not meet the diversification needs of discerning investors.

Just as short-term stock market volatility impacts the performance of your stocks, rising bond yields will have implications for bond investors. Governments and corporations typically issue bonds as a means of raising funds to finance expenses. Changes in interest rates affect bond yields. When yields increase, the net asset value of debt funds decreases.

Besides the two most popular asset classes, gold can play a strategic role by acting as a portfolio diversifier for investors in times of crisis. However, gold prices are heavily influenced by geopolitical events associated with inflation and any sign of a slowdown in the global economy.

The ultimate asset allocation solution

Implementing the right asset allocation strategy can help investors balance risk and reward. The amount invested should be carefully divided into several assets such as stocks, fixed income securities, cash and cash equivalents, etc.

Here’s an asset allocation strategy that can help investors build long-term wealth by calculating risk versus long-term return. The 12:20:80 rule represents 12 months of set aside emergency funds; 20% to invest in gold and 80% to invest in equity, providing a simple solution for long-term goals.

How does the 12:20:80 rule work?

Using this method, the investor invests an amount equivalent to 12 months of their expenses in a liquid fund to ensure the safety and liquidity of returns. These 12 months of safe money placed in liquid funds carry a low risk of default, as Quantum Liquid funds only invest in the highest rated government securities, treasury bills and PSU/PFI instruments.

Of the total amount invested, 20% of portfolio assets are invested in gold via gold funds and gold savings funds, while the remaining 80% are invested in stocks via gold funds of funds. stocks and value funds. For example, if you plan to create a portfolio from Rs 1 lakh – Rs 20,000 will be invested in gold funds while Rs 80,000 will be invested in equity funds.

To understand this 80% equity allocation, let’s break this down further for your understanding.

This Rs 80,000 will be divided into 3 parts

  • Rs 56,000 in Quantum Equity funds of funds (70% of total equity allocation)
  • Rs 12,000 in Quantum Long Term Equity Value Fund (15% of total equity allocation)
  • Rs 12,000 in Quantum India ESG Equity Fund (15% of total equity allocation)

Fund of equity funds (FOF) is a basket of 5 to 10 well-documented third-party action programs. They can help you invest in shares of other leading equity funds through a single fund that may or may not be managed by the same asset management company that manages the FOF. Quantum Equity FOF selects the most suitable 400 equity fund regimes with a track record of at least 5 years. This reduces the hassle of making and tracking multiple investments.

This allocation of 70% of the total shares is strategically placed in a fund composed of Midcap, Large Caps, Flexicaps, Bluechips and Growth funds. Of the remaining 30%, 15% is based on a mutual fund following the principles of value investing. the
Quantum Long Term Value Equity Fund selects plans with over 15 years of experience to deliver long-term risk-adjusted returns. In accordance with its responsible investment principles, the
Quantum India ESG Equity Fund invests in shares of companies that meet the criteria of non-financial parameters such as the environment, social and governance. Quantum India ESG Equity Fund is one of the first ESG funds launched in India. This helps you build a resilient portfolio and achieve the necessary diversification.

There are a myriad of fund styles and choosing the right one can be a daunting task for many investors. Going for this holistic approach can be a great decision for investors in current market conditions. With this asset allocation strategy, you can have the chance to invest in a ready-made portfolio.

Spotlight on ET

Warning: The opinions expressed here in this article/video are for general information and reading purposes only and do not constitute any guidelines or recommendations on a course of action for the reader to follow. Quantum AMC / Quantum Mutual Fund does not guarantee/offer/disclose any indicative return on investments made in the programme(s). The Opinions are not intended to be professional guidance / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund shares for the reader. The article/video has been prepared based on publicly available information, internally developed data and other sources believed to be reliable. Although no action has been sought on the basis of the information provided here, every precaution has been taken to ensure that the facts are correct and that the opinions expressed are fair and reasonable at this time. Readers of the article/video should rely on information/data from their own investigations and advised to seek independent professional advice and make an informed decision before making any investment. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their affiliates or representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary loss or damage, including lost profits arising in any way whether on account of any action taken based on the data/information/views provided in the article/video.

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