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Allocating Your Money

Ashish Balsawer wants to know in what ratio he should divide his money between liquid & equity funds

In what ratio should I divide my money into liquid fund and equity fund?
- Ashish Balsawer

The allocation of your money should be guided by your goals. The money which you might require in the next 2-3 years should be invested in fixed income avenues. Also if you expect regular income from your investment should be dominantly in fixed income investment. If you are averse to your principal going doing in value in the interim then equity investment is avoidable.

The above points should primarily guide your asset allocation. Even if you are investing for long-term, do not require periodic income from investment and can withstand volatility of your principal you should have a fixed income allocation to periodically rebalance your portfolio. Portfolio rebalancing is starting your investment with an allocation to equity, debt and cash and re-balancing the allocation as it changes over time with varying appreciation or depreciation of your chosen investment. Ideally, it should be done every year to reduce tax incidence or in situation where your allocation changes radically.

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