12|20:80 Approach of Asset Allocation Mutual Funds (2024)

FAQs

12|20:80 Approach of Asset Allocation Mutual Funds? ›

With this strategy investors need to allocate at least 12 months worth of their monthly expenses in a liquid fund which can thus be easily liquidated in times of emergencies, allocate 20% of the overall portfolio to Gold to provide downside protection during uncertain times, and dedicate 80% of the total investable ...

If you are a moderate-risk investor, it's best to start with a 60-30-10 or 70-20-10 allocation. Those of you who have a 60-40 allocation can also add a touch of gold to their portfolios for better diversification. If you are conservative, then 50-40-10 or 50-30-20 is a good way to start off on your investment journey.

Three simple steps of asset allocation can help you tide over any challenge that might keep you away from achieving your financial goals. These 3 steps are based on the 12:20:80 fundamental of Asset Allocation which stands for: 12 months of expenses; 20 percent investment in gold and 80 percent in equity.

Thematic or sectoral funds - These funds invest at least 80% investment in stocks of a particular sector/ theme like international stocks, emerging markets, BFSI, IT, or pharmaceuticals. These funds carry higher risk due to their narrow focus on a particular sector or theme.

If you're a younger investor with a long time horizon and are comfortable taking on more risk, the 80/20 portfolio may be a good fit. However, if you're closer to retirement or prefer a more conservative approach, the 60/40 portfolio may be a better option.

How to derive an asset allocation strategy? Your age, your risk profile and your investment horizon are the most important factors to consider when deciding which asset class to invest in. It is advisable to move most of your assets from equity to debt as you grow older.

Your ideal asset allocation is the mix of investments, from most aggressive to safest, that will earn the total return over time that you need. The mix includes stocks, bonds, and cash or money market securities. The percentage of your portfolio you devote to each depends on your time frame and your tolerance for risk.

The old-school approach for many investors and financial advisors has traditionally been to structure an investment portfolio on a 70/30 basis (or similar figures). This strategy allocates 70% of an investor's funds to equities or equity-focused investments, and 30% to bonds, or fixed-income investments.

1 The 80:60 Strategy is defined as a strategy that generates 80% of all positive month returns and 60% of all negative returns. In this example it is using the S&P 500 index as the reference benchmark. 2 Not losing as much helps when the market turns upward and you can earn more money on a higher base.

The 75/25 Strategic Allocation Portfolio is a unit investment trust that has been developed to address these needs. It invests in a fixed portfolio of common stocks and exchange-traded funds (ETFs) which are selected by applying our disciplined investment process.

What is the 8 4 3 rule in mutual funds? ›

The rule of 8-4-3 for mutual funds states that if you invest Rs 30,000 monthly into an SIP with a return of 12% per annum, then your portfolio will add Rs 50 lacs in the first 8 years, Rs 50 lacs in the next 4 years to become Rs 1 cr in total value and adds further Rs 50 lacs in the next 3 yrs to reach Rs 1.5 cr.

The 20/25 rule for mutual funds is a simple and effective way to diversify your portfolio and reduce your risk. It states that you should invest in no more than 20 mutual funds and no more than 25% of your portfolio in any one fund.

While personal finance experts generally recommend allocating 25-35 percent of your investments to mutual funds, the exact allocation cannot be done using a one-size-fits-all approach. Understanding how much and in what level one should regularly invest in mutual funds, requires a thoughtful and personalised approach.

In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.

Warren Buffet's 2013 letter explains the 90/10 rule—put 90% of assets in S&P 500 index funds and the other 10% in short-term government bonds.

If you take an ultra-aggressive approach, you could allocate 100% of your portfolio to stocks. Being moderately aggressive. move 80% of your portfolio to stocks and 20% to cash and bonds.

1Lotteries, markets, barter, rationing, and redistribution of income are all methods commonly used to. allocate scarce resources.

Aggressive investors: An aggressive investor can consider about 50-60 percent allocation to largecaps, 15-25 percent to midcaps and the remaining 15-25 percent to smallcaps. This can be achieved by having a mix of largecap funds, flexicap/large&midcap funds, midcap funds and smallcap funds.