Asset Allocation & Diversification!

Once your asset allocation framework is in place, how you spread your money within each asset class is diversification. For instance, you may decide to allocate 70 per cent of your portfolio to equity, 25% to debt, and 5% to gold. That is asset allocation. Then you diversify within the asset. For example, in debt, you may have a mix of short-term debt funds, fixed deposits, and Public Provident Fund. Blindly packing your portfolio with funds is not diversification; there will be a huge overlap of stocks. Diversify across fund houses and investment styles. Asset Allocation and Diversification are time-tested strategies that provide stability to a portfolio and insulation against volatility. They are core tenets of investing.