2020 was a reminder that it is difficult to predict short term market movements. All asset classes don’t move at the same pace or in the same direction.
The key takeaway remains to be, good old simple diversification. Don’t put all your eggs in one basket! Investors need to use an effective asset allocation strategy to diversify across all three asset classes of equity, debt and gold.
What is Asset Allocation?
Asset allocation refers to the amount of money you allocate or invest in different asset classes for diversification to protect the downside risks.
What is the Simple Asset Allocation Strategy to Help You Build Wealth?
Quantum Mutual Fund has always strived to simplify the investment ecosystem for its investors. At Quantum, we suggest you consider an Asset Allocation of 12,80-20 ** that has a potential to help you reach your financial goals.
The crucial 12 – your Emergency Funds
As a thumb rule before starting your investment journey, ensure that you have set aside at least 12 months of your monthly expenses as your Emergency fund. This could be saved in your bank accounts or a liquid fund (that prioritizes safety and liquidity over returns).
These expenses will take care of your household expenditure, help you pay off your utility bills or medical expenses in case of any unforeseen circumstances etc.
You can thereafter allocate to Equity and Gold in your portfolio.
The 80 – Long Term Risk Adjusted Returns with EQUITY
Invest 80% in a diversified equity portfolio that has the potential to help you reach your financial goals over the long term. Each equity investment within this portfolio should be able to add unique value.
70% of your EQUITY portfolio can be invested in Quantum Equity Fund of Funds.
By investing in this single fund, your money is diversified across 5-10 equity schemes based on extensive qualitative-quantitative research. These are schemes chosen from different fund houses shortlisted after gaining valuable insights. Quantum conducts one-on-one interactions and assesses the calibre of the fund managers, something that investors don’t have easy access to.
The Quantum Equity Fund of Funds reduces the hassles of making and tracking multiple investments. A single NAV is all you need to check.
- Quantum Long Term Equity Value Fund – Value Style of Investing
15% of your EQUITY portfolio can be invested in Quantum Long Term Equity Value Fund.
Following the tenets of Value Investing, Quantum’s strategy remains to identify good companies and try to buy them at a discount to their fair value.
In markets where risk aversion is very high and companies trade at large discounts to their fair value, generally QLTEVF may be an aggressive buyer and in euphoric markets, the fund may be selling stocks which are overvalued and wait on the side-lines.
- Quantum India ESG Equity Fund – Invest Responsibly
15% of your EQUITY portfolio can be invested in Quantum India ESG Equity Fund.
Once a niche, ESG investing is now a fast growing preference for investors across the globe. Quantum India Equity ESG Fund (QESG) is one of the ESG themed schemes investing in Indian companies.
QESG portfolio holdings are based on Quantum’s in-house comprehensive and robust proprietary research on ESG. The research team looks at the stock’s ESG score to determine its weightage in QESG. Companies with high ESG scores are given high weight and with lower ESG scores are given low weight in QESG portfolio. Having said that, companies that get a bad ESG score will never make it to the QESG portfolio.
The 20 – A Timeless Investment Option with GOLD
20% of your overall portfolio can be made in the Quantum Gold Saving Fund.
Gold, because of its characteristic of being a stable form of money and potential to store value over long time periods, it will continue to be a preferred portfolio asset diversifier. Investors should capitalize on Gold’s risk-reducing, return-enhancing characteristics.
Invest in Quantum Gold Saving Fund as you don’t have to worry about purity, storage, making charges/premium and insurance of gold. Each unit of a Gold ETF represents ½ gram of 24 carat pure physical gold. To further make investing in Gold more disciplined, investors can also opt for an SIP.
While prudent asset allocation is one way to mitigate downside risk against market uncertainty, if you are still not sure, one can think of investment in Quantum Multi Asset Fund of Funds (QMAFOF)
This Fund diversifies portfolio across asset classes such as equity, debt and gold depending on market conditions while aiming to generate long-term risk adjusted returns.
The fund managers of QMAFOF strategically position the portfolio depending on the market conditions, thus allowing you to ignore the need to time the market. The fund has a broad and flexible mandate to dynamically allocate anywhere between 25%-65% of the portfolio to equity or debt and 10% – 20% to gold.
Disclaimer, Statutory Details & Risk Factors:
Mutual fund investments are subject to market risks read all scheme related documents carefully.