Reduce portfolio volatility by investing across asset classes, says expert

Equities tend to be volatile in the short term but can offer good returns over the long-term

As data from the past 10 years demonstrate, no one asset class performs every year. Only if you allocate across various asset classes will your portfolio benefit, irrespective of which class performs in a particular year. A diversified portfolio is key to achieving financial goals

A BASIC ASSET ALLOCATION APPROACH

• In a long-term portfolio, allocate to equities using 100-less-age formula. A 30-year old will have a 70 per cent allocation
• More risk averse investors should have lower equity allocation than dictated by this formula
• Allocate 10-15 per cent to gold
• What is left may be allocated to fixed income
• Within equities, allocate around 15-20 per cent