Keep the diversification compass well balanced

For Shweta Shankar, a Bengaluru based IT professional in her early forties, real estate was the primary asset of choice soaking up nearly all her net worth, save the customary fixed deposits she had for any surplus cash. Investments in realty, she believed, are safe and a reliable long-term wealth creator; an ideal choice for her family's future. However, asset prices and returns change over periods; over-allocation to one asset can be disadvantageous. Bank fixed deposits, for example, offered 9% on a 1-year deposit back in 2014; today you get only around 6.5-7% for the same. As is evident with recent residential real estate prices across big and small cities in India, it's hard to tell when a price correction might come or how long it will stay. "It's only after our adviser came into the picture that we realised there are potentially higher and more stable returns to be made in the long term if we have a diversified portfolio. Ultimately, we have arrived at a goal-driven portfolio and it's a mix of equity, fixed income and also some real estate," said Shankar. Diversification is a concept that's now being understood and implemented better. With more awareness around goal setting and long-term wealth creation, well thought out asset allocation gains significance. What does it mean? Dive

This article was originally published on May 24, 2018.