There are different types or category of assets (investments) in which you can invest like Equity, Commodities, Debt (Fixed Income instruments), Real Estate, Alternative Investments. Each asset class or category varies in terms of degree of risk, liquidity, volatality and expected returns on investment.
The minimum objective of any long term investment of your money is to earn a return on investment that is more than the rate of inflation. If your investments are earning less than the rate of inflation then your wealth is getting eroded in real terms as the cost of goods and services that you will be able to purchase will increase faster than rate of growth of your money.
Before making any investment it is important to consider your current stage of life, your age, number of dependents, your current accumulated surplus, your short term liquidity requirements and your long term financial objectives. Based on this information, one needs to plan asset allocation which basically means deciding what percentage of your money to be invested in which asset class. Also the most important factor to consider is market conditions in each of the different asset classes. For e.g. you might have a bigger risk appetite but if the markets are in strong bearish mood then it is not worthwhile to start making investments in a bear market. So the market conditions at the time of investing is a very critical factor while deciding your asset allocation.
A dynamic smart allocation helps you control risk by reducing your exposure to an asset class when risk is high and increasing your exposure when the risk is low. The key to maximization of returns on investment is to focus on keeping your risks low. An astute financial planner can help you do such smart asset allocation and ensure that you have the right asset allocation to maximize your return on your investment given your appetite for risk and degree of expected volatility.
MULTIPLY CAPITAL 