Changing Trends and Asset Allocation
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Nothing is Permanent. So are the Trends of every asset class in Investing. We discussed earlier various investment products that can be used to achieve our goals. As every person have their own specific goal so their investment products will also be according to their goal.
The important thing in investing that we need to understand is that trend of every asset class changes over the period of time, it’s a law of nature that whatever goes up comes down, Same happens with all types of investment products.
We recently saw a recovery in the long-running bear phase of our equity market or the stock market, similarly, the real estate market is going through a bear phase after it’s long-running bull market since 2004 to 2012. Also, we saw an upward move in Gold after a standstill range of about 5 years.
So every asset class has its own cycles or their own trends. We need to allocate more of our investments when there is a downtrend in that asset class and decrease our investments from those asset class when they have a long-running upward move.
Asset Allocation
Asset Allocation among different asset class has paid handsome returns to its loyal followers over the long run with the lowest risk.
Many investors try to follow the changing trends in a particular asset class or a particular stock which is wrong and it will disappoint such investors most of the time along with the risk they take to do such timing in the market.
It is risky if you are trying to time the markets and get in and out of the stock. But as we are talking about trends in an asset class.
So we need to make a rule that, Sell a portion of that asset class which gives us the handsome profit and moves that money to another asset class where the trend is bearish or downward.
By doing this, the asset remains the same, but money earned from that asset class is transferred to different asset class where the chances of upside are much more.
New investors often try to do the opposite and they get disappointing results because they are taking a very high risk with their money.
Smart Investing is all about creating wealth with low risk and compounding investments over a long period of time.
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Hi, I’m Managing Director at Gurpreet Saluja Financial Services where I help my investors to invest in mutual funds and achieve their financial goals. I’m also a Value Investor and here I write about Personal Finance & Investing.