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What all investments shall we consider as fixed income while following an asset allocation plan?

Dhirendra Kumar discusses the need to have a fixed-income allocation

You always emphasise maintaining an asset allocation plan. Please explain if the Senior Citizen Savings Scheme and Pradhan Mantri Vaya Vandana Yojana should also be treated as fixed-income allocation. Or shall we consider only the mutual fund investments for asset allocation purposes?
- Arun Serdeshpande

They are pure fixed-income investments, and I understand you've chosen them for their guaranteed/assured returns and stability.

You should have a fixed-income allocation because it provides general stability to your overall investment. Assuming you have Rs 50 lakh invested in equity, then the entire capital will be volatile. If out of that Rs 50 lakh, you have,say, Rs 25 lakh invested in these two investment avenues, then at least this portion won't face that kind of volatility.

The problem is that while most people keep watching their equity allocation very closely, thereby getting nervous, they do not take into account their asset allocation framework. One should always take a holistic view of their investments. Even if 50 per cent of your accumulation is into volatile investments, at least the other 50 per cent is fairly stable. As a result, your overall portfolio is not as volatile.

So, keep this in mind even in your mental calculation. You often would have noticed people losing sleep on seeing their investment in equity funds going down by 10 per cent. But when you take a holistic view, you won't lose your sleep, which is the whole idea.

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