The most important aspect in asset allocation is to give the investment instruments time. This is what emerged from the Business Standard Smart Business panel discussion on ‘Asset Allocation and Rebalancing is key to Wealth Management’ held in association with ASK Circle.
Kaushik Chakraborty, Associate Director Retail Sales), IDFC Asset Management Company, said that three important factors needed to be considered: the role of asset class, the risk appetite of the investor and balancing the asset class based on the first two factors.
"At the moment we are passing through a turbulent phase, but it is a good time to rebalance," Chakraborty said.
Surendra K Bagaria, Founder President, ASK Circle, said that there were essentially four asset classes - equity, debt, real estate and gold. "Real estate and gold are not for wealth creation, but only to the extent of use," he pointed out.
The key takeaway from the discussion, however, was that there is no thumb rule for investment. Chakraborty illustrated it with an example. "Between 2000 and 2004, debt delivered the best return; between 2004 and 2008, it was equity; while 2008 to 2012 was the era of gold. So there is no fixed asset class which will perform or miss and hence a balanced asset allocation is key," he said.
Expectation management of investors was also an arduous task, said Chakraborty. Bagaria said that after tax and inflation, if the investor was getting returns, then he was making wealth. "Balancing depends on goal of the person," he said, but added that in a growing economy, no asset class could perform better than equity.