An asset mix relates to a mix of investments in an investor’s portfolio. This asset mix is usually created from the three main asset classes: equities, fixed income, and cash and cash equivalents.
The asset mix is considered to be one of the most important decisions that an individual is required to be making in investments.
How and in what proportion should an individual invest in assets? Well, this depends upon various factors such as income, age, family or other financial responsibilities, along with several other important conditions.
While there are no hard and fast rules and an individual can plan their own asset mix at their convenience.
Ideally, it is suggested that an individual in the age-group of 20-35 should invest more in equities – this could go up to 70%, while 30% may be invested in fixed securities.
In addition, investment in real estate can be considered at this age as well. This is because this is the ideal age when one has the ability to repay a higher equated monthly installment (EMI), and one’s personal financial needs are curtailed relatively.
Furthermore, if an individual is between 35-50 years of age, a 50:50 asset mix in equities and fixed income is recommended. This is because one still has a few years of working life remaining.
Also, consider that a retirement option when an individual enters 35 is also not out of place as this will give one 25 years more to plan and create a decent retirement corpus.
Finally, for individuals above the age of 50, risk should be minimised, and almost 70% should be in fixed-income securities. In this case, the balance can be in equities of relevant mutual fund schemes. This is because as one’s earning years have reduced, one’s focus should be on safe investments, even if returns are limited thereon.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.