{"id":487,"date":"2020-06-03T10:05:19","date_gmt":"2020-06-03T10:05:19","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=487"},"modified":"2020-06-03T10:05:21","modified_gmt":"2020-06-03T10:05:21","slug":"5-reasons-why-asset-allocation-is-key-to-your-financial-freedom","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/5-reasons-why-asset-allocation-is-key-to-your-financial-freedom\/","title":{"rendered":"5 Reasons Why Asset Allocation is Key to your Financial Freedom"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p>In the event that you are a devoted peruser of our blogs, you may have understood that we frequently accentuate on doing proper asset allocation in your investment portfolio. Building an investment portfolio through optimal asset allocation is imperative while you attempt to accomplish your investment objectives to achieve financial freedom. So in this article, we thought of clarifying asset allocation to you citing the benefits it offers to you as investors. \u00a0<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list\"><li><a href=\"#What_Is_Asset_Allocation\" title=\"What Is Asset Allocation?\">What Is Asset Allocation?<\/a><\/li><li><a href=\"#5_Reasons_why_Asset_Allocation_can_help_you_achieve_your_Financial_Freedom\" title=\"5 Reasons why Asset Allocation can help you achieve your Financial Freedom\">5 Reasons why Asset Allocation can help you achieve your Financial Freedom<\/a><ul><li><a href=\"#Optimal_Returns\" title=\"Optimal Returns\">Optimal Returns<\/a><\/li><li><a href=\"#Risk_Minimization\" title=\"Risk Minimization\">Risk Minimization<\/a><\/li><li><a href=\"#Help_Investments_Align_with_Time_Horizon\" title=\"Help Investments Align with Time Horizon\">Help Investments Align with Time Horizon<\/a><\/li><li><a href=\"#Minimize_Taxes\" title=\"Minimize Taxes\">Minimize Taxes<\/a><\/li><li><a href=\"#Ample_Liquidity\" title=\"Ample Liquidity\">Ample Liquidity<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">What Is Asset Allocation?<\/h2>\n\n\n\n<p>Asset allocation refers to the spreading of your surplus across multiple asset-class including equity, debt, gold, real estate and other money-market instruments to ensure that the investment portfolio\u2019s risk and reward are balanced. \u00a0Asset allocation helps investors in minimizing the risk of their investments through <strong><a href=\"https:\/\/www.invest19.com\/blog\/5-reasons-why-your-diversification-strategy-isnt-working\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"diversification (opens in a new tab)\">diversification<\/a><\/strong>. If you look at the historical returns of stocks, bonds, and cash haven\u2019t moved as one. There is no direct correlation between these three. Under certain market conditions, not all asset classes can move in the same direction. A market condition that leads one to outperform might cause another to underperform. <\/p>\n\n\n\n<p>In addition to diversification,\nthe asset allocation is vital to achieve your financial goals and have that\nkind of freedom that you always longed for. But, that\u2019s not all \u2013 there are many\nbenefits of asset allocation and can work as a key to your financial freedom. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">5 Reasons why Asset Allocation can help you achieve your Financial Freedom<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Optimal Returns<\/h3>\n\n\n\n<p>Many investors have a habit of\ninvesting in impromptu ways. Without proper asset allocation, it becomes\ndifficult for them to find out whether the returns received on investments is\nenough to achieve their financial goals or not. It is because some investors\nare too aggressive and some are too conservative, so they are unable to earn\noptimal returns required to fulfil their financial goals. <\/p>\n\n\n\n<p>But, with proper asset\nallocation, one can learn how much profit he\/she can earn on investments based\non investment risks. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Risk Minimization<\/h3>\n\n\n\n<p>Investors make investment\ndecisions either based on their past investment experiences or risk tolerance. If\nyou\u2019ve earned a good profit in the past, you might become an aggressive investor\nwho would give preference to equities. While if you\u2019ve already burnt your\nfingers and incurred significant losses, you may become too conservative and\ninvest only in fixed income instruments. However, learning from past\nexperiences is not a bad thing. Sometimes, investors made mistakes of investing\nin riskier asset classes like equities to achieve their financial objectives\nand become the victim of volatility. Asset allocation provides them with the right\nexposure of asset-classes that they needed to minimize risks and generate\noptimal returns to achieve your financial goals. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Help Investments Align with Time Horizon<\/h3>\n\n\n\n<p>Time horizon is one key factor to\nbe considered at the time of investing. Different financial goals have different\ntime horizons which demand different strategies to approach. Similar to this,\nasset classes tend to move differently in certain market conditions. As you\nknow that equity investments generally have a higher risk and higher reward\npotential. But, on long-term equities are less risky. While debt is considered\nrisky in the long-term and can benefit more in short to medium-term goals. <\/p>\n\n\n\n<p>Proper asset allocation helps you align your investments with your time horizon by determining an ideal mix of assets based on your time horizon. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Minimize Taxes<\/h3>\n\n\n\n<p>Would investing all your savings\nin stocks or fixed deposits will benefit you from the taxation point of you?<\/p>\n\n\n\n<p>Absolutely not! If you\u2019re doing\nthe same thing, you are making a huge mistake and must be paying a huge amount\nin taxes which otherwise could have been saved if you\u2019d spread your investments\nacross the multiple-asset class. With the asset allocation, you can spread your\nsurplus even in tax-saving investment schemes that can help you save taxes and\nultimately, your financial goals. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Ample Liquidity<\/h3>\n\n\n\n<p>Due to unavoidable circumstances,\nthe investors were forced to stop their investments for urgent funds. They were\nforced to redeem their investments long before achieving their financial goals.\nHowever, it is not wise to stop your investments in the middle. To avoid such\ncircumstances, asset allocation can help you spread your investments in high\nand low liquidity assets so that if you\u2019d required some funds in future, you\ncan have ample liquidity without disturbing your overall investments.<\/p>\n<div class='epvc-post-count'><span class='epvc-eye'><\/span>  <span class=\"epvc-count\"> 3,580<\/span><\/div><div class=\"pld-like-dislike-wrap pld-template-1\">\n    <div class=\"pld-like-wrap  pld-common-wrap\">\n    <a href=\"javascript:void(0);\" class=\"pld-like-trigger pld-like-dislike-trigger \" title=\"\" data-post-id=\"487\" data-trigger-type=\"like\" data-restriction=\"ip\" data-ip-check=\"0\" data-user-check=\"1\">\n                        <i class=\"fas fa-thumbs-up\"><\/i>\n                    <\/a>\n    <span class=\"pld-like-count-wrap pld-count-wrap\">1    <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>In the event that you are a devoted peruser of our blogs, you may have understood that we frequently accentuate on doing proper asset allocation [&hellip;] <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/www.invest19.com\/blog\/5-reasons-why-asset-allocation-is-key-to-your-financial-freedom\/\">Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":488,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,7],"tags":[135],"class_list":["post-487","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-market","category-investment","tag-asset-allocation"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/487","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=487"}],"version-history":[{"count":1,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/487\/revisions"}],"predecessor-version":[{"id":489,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/487\/revisions\/489"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/488"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=487"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=487"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=487"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}