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 ...

The Names Rule currently requires registered investment companies whose names suggest a focus in a particular type of investment to adopt a policy to invest at least 80 percent of the value of their assets in those investments (an “80 percent investment policy”).

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.

Asset allocation means dividing up your assets in the right proportions among equities, debt, bonds, and gold to maximize your chance of achieving your financial goals while also trying to control investment risk. Follow a 12:20:80 asset allocation strategy.

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.

At the end of the 20th year of your investment, your corpus will reach around Rs 1 crore. If you continue this investment for another 10 years, or a total of 30 years, your wealth will grow much faster.

Diversified management investment companies have assets that fall within the 75-5-10 rule. A 75-5-10 diversified management investment company will have 75% of its assets in other issuers and cash, no more than 5% of assets in any one company, and no more than 10% ownership of any company's outstanding voting stock.

The most common dynamic asset allocation strategy used by mutual funds is counter-cyclical strategy. These funds increase their equity allocation (reduce debt allocation) when equity valuations decline (become cheaper) and reduce debt allocations.

Many financial advisors recommend a 60/40 asset allocation between stocks and fixed income to take advantage of growth while keeping up your defenses.

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.

Is 80-20 a good investment strategy? ›

The 80/20 rule is a concept suggesting that 80% of your results come from 20% of your efforts. This rule can be used in various contexts; however, investing experts caution against using it in portfolio management.

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 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.

What is the 8-4-3 rule of compounding? In the 8-4-3 strategy, the average return of a particular investment amount for 8 years is 12 per cent/annum, while after that time period, it will take only half of that horizon, i.e., 4 years (total 12 years), to get a return of 12 per cent.

Due to having less than 100% equity allocation in all cases, we see that the hybrid funds are the safest in terms of risk. A few other observations: as the market cap of the funds reduces (large-cap > mid-cap > small-cap etc.), the risk increases. within diversified funds, large-cap funds have the least risk.

In the case of non-fulfillment with either of the above two conditions i.e. minimum of 20 investors and no single investor should account for more than 25% of the corpus of the scheme/plan, a three months time period or the end of succeeding calendar quarter, whichever is earlier, from the close of the Initial Public ...

If you invest Rs 1000 for 20 years , if we assume 12 % return , you would get Approx Rs 9.2 lakhs. Invested amount Rs 2.4 Lakh.

It is based on the principle of compounding, which means earning interest on your interest. The rule suggests that you should invest 15% of your income for 15 years in a mutual fund that gives 15% annual returns. If you follow this rule, you can turn a small amount of money into a large sum over time.

The classic rule of 72 formula delivers the amount of time it takes to double an investment at a given compound interest rate, meaning the interest is calculated on the initial amount and the amount of accrued interest each subsequent year. That is accomplished by dividing 72 by the expected rate of return.

Specifically, a fund is prohibited from: acquiring more than 3% of a registered investment company's shares (the “3% Limit”); investing more than 5% of its assets in a single registered investment company (the “5% Limit”); or. investing more than 10% of its assets in registered investment companies (the “10% Limit”).