Aditya Birla Sun Life Mutual Fund

Asset Allocation

Asset Allocation

  • Q1. A 100% allocation of investment to stocks means that you are?
    • Wrong!

      Both of these.

      Sorry! Both of these are important conditions before you can allocate 100% to stock investments.

      Sorry! Both of these are important conditions before you can allocate 100% to stock investments.

      Correct! Only a long term horizon when you can withstand serious declines, even though short term, in your investments is when you are ready for 100% allocation to stocks.

      Sorry! Both of these are important conditions before you can allocate 100% to stock investments.

  • Q2. Risk taking capacity has no role to play in determining your Asset Allocation?
    • Wrong!

      False

      Sorry, you missed it! If you don’t know how much risk are you willing to live with, it is difficult to determine an asset allocation. For example, if you are willing to withstand sharp declines in your portfolio, you may consider a high allocation to stocks.

      Right! If you don’t know how much risk are you willing to live with, it is difficult to determine an asset allocation. For example, if you are willing to withstand sharp declines in your portfolio, you may consider a high allocation to stocks.

  • Q3. Asset Allocation helps you achieve diversification of investments and lower the risk in your portfolio?
    • Wrong!

      Yes

      Correct! Now, this seems like an easy one but isn’t. Because choosing the right allocation and the right investments is equally important for your portfolio. Yes, it begins with the recognition that you need to have an asset allocation.

      Incorrect! Now, this isn’t an easy one. Asset allocation as a concept does not come naturally to us even though it is an important aspect of portfolio management. Remember, choosing the right allocation and the right investments is equally important for your portfolio.

  • Q4. A 50:50 allocation to Stocks: Bonds is likely to be suitable for an investor with?
    • Wrong!

      Moderate risk capacity

      Great job! That’s the correct answer. Moderation represents balance. What better way to state it than 50:50!

      Ah, was that by mistake! Moderation represents balance. What better way to state it than 50:50!

      Ah, was that by mistake! Moderation represents balance. What better way to state it than 50:50!

  • Q5. For most investors, it is NOT important to define your Asset Allocation before making investments?
    • Wrong!

      False

      Incorrect! We wish it was TRUE, but it isn’t. Only when your asset allocation is in place, in line with your risk taking capacity and time horizon, do you move towards picking your investments. Not the perfect recipe but quite likely to help you stand against investment risks.

      Correct! Only when your asset allocation is in place, in line with your risk taking capacity and time horizon, do you move towards picking your investments. Not the perfect recipe but quite likely to help you stand against investment risks.

  • Q6. Which of the following type of mutual fund qualifies as an asset allocation product?
    • Wrong!

      All of these

      Hard luck! We know it can be confusing sometimes. But here’s how you go about looking at them. Dynamic asset allocation changes its investments to various assets based on pre defined conditions. A Hybrid aggressive has a substantial portion allocated to equity / stock investments. A Hybrid Conservative has more of its portfolio in Bonds / Fixed income investments.

      Hard luck! We know it can be confusing sometimes. But here’s how you go about looking at them. Dynamic asset allocation changes its investments to various assets based on pre defined conditions. A Hybrid aggressive has a substantial portion allocated to equity / stock investments. A Hybrid Conservative has more of its portfolio in Bonds / Fixed income investments.

      Hard luck! We know it can be confusing sometimes. But here’s how you go about looking at them. Dynamic asset allocation changes its investments to various assets based on pre defined conditions. A Hybrid aggressive has a substantial portion allocated to equity / stock investments. A Hybrid Conservative has more of its portfolio in Bonds / Fixed income investments.

      Hard luck! We know it can be confusing sometimes. But here’s how you go about looking at them. Dynamic asset allocation changes its investments to various assets based on pre defined conditions. A Hybrid aggressive has a substantial portion allocated to equity / stock investments. A Hybrid Conservative has more of its portfolio in Bonds / Fixed income investments.

      Awesome! You have a really good understanding of mutual fund products. Dynamic asset allocation changes its investments to various assets based on pre defined conditions. A Hybrid aggressive has a substantial portion allocated to equity / stock investments. A Hybrid Conservative has more of its portfolio in Bonds / Fixed income investments.

  • Q7. Which of the following is NOT true about when to review your asset allocation?
    • Wrong!

      Review every time markets go up or down by 10%

      Ah! May be you haven’t really caught on to the whole plan based approach to investments. Only when you have a very short term, likely speculative view of your investment portfolio, you will go for a market change based review. Beware! Asset Allocation reviews are warranted only when something significant happens to your own financial life or existing investments.

      Ah! May be you haven’t really caught on to the whole plan based approach to investments. Only when you have a very short term, likely speculative view of your investment portfolio, you will go for a market change based review. Beware! Asset Allocation reviews are warranted only when something significant happens to your own financial life or existing investments.

      Ah! May be you haven’t really caught on to the whole plan based approach to investments. Only when you have a very short term, likely speculative view of your investment portfolio, you will go for a market change based review. Beware! Asset Allocation reviews are warranted only when something significant happens to your own financial life or existing investments.

      True that! Asset Allocation reviews are warranted only when something significant happens to your own financial life or existing investments. Only when you have a very short term, likely speculative view of your investment portfolio, you will go for a market change based review. Beware!

  • Q8. If you prefer complete safety of your investments and are even willing to accept lower returns, which of the following asset allocation will apply?
    • Wrong!

      100% bonds/fixed income products

      This was a cakewalk, right? It could be tempting to select another option, but you have your head right there on your shoulders.

      Wish you were correct! But except for the 100% allocation to bonds/fixed income products, there is no way you can ask for TOTAL safety. Better safe than sorry!

      Wish you were correct! But except for the 100% allocation to bonds/fixed income products, there is no way you can ask for TOTAL safety. Better safe than sorry!

      Wish you were correct! But except for the 100% allocation to bonds/fixed income products, there is no way you can ask for TOTAL safety. Better safe than sorry!

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