Risk Profiling and Asset allocation - BM Fiscal

It is always said that one "must" invest based on his Risk profile. Means finding optimal asset allocation based on the level of risk person willing to take for his growth.

So basically it is a process of finding optimal level of investment risk for your clients considering

1. Risk required.
2. Risk capacity
3. Risk Tolerance

Your asset allocation determines your overall risk and return. Asset allocation is one of the most important steps in your portfolio management process. The initial step for the financial planner is to determine your required rate of return based on your financial goals, risk tolerance. The second step is to ascertain capital market expectations, as well as the expected return and expected volatility of each asset class. There are certain Asset allocation strategies.

1. Put Your Age in Bond: If you are 30 then you own 30% bond and 70 % Stock and if we are 70 then you own 70% bond and 30% stock this is oldest and simplest asset allocation strategy
2. Control Your Maximum Loss: In this, by taking different cases into consideration we try to minimize the maximum loss in the worst case.
3. Ration for the Worst Case: This is mainly retirement asset allocation. In which we take all things into consideration such as what is our monthly expenses for stable life about retirement. And we take decisions according to that.
4. Split The Difference: Unsure about stocks versus bonds? Want to follow your own asset allocation path, but don’t know where to begin? Here is a commonsense starting point for new and old investors alike: Just split the differences allocate 50% each to stocks and bonds.
5. Use all in one fund: Maybe the above rules of thumb still require too much decision-making for you? Maybe you’d feel more comfortable letting somebody else makes the call, but you don’t want the hassle and expense of hiring a personal financial advisor…Well, your next option could be an "all-in-one" mutual fund that provides one-stop shopping for most of your assets.

BM Fiscal Different asset allocation tools help you to tell what exactly your returns will be based on your Age and Investment with respect to asset allocation.

Risk profiling is done by BMFPA to determine the risk profile of the client before the investment strategies are finalized. Every client has a different risk-bearing capacity pertaining to his investments. Investor risk profiling is at the heart of private wealth management. In other words without proper knowledge of the investor’s goals, time horizon, and risk aversion, it is impossible to recommend suitable investments or build efficient long-term investment strategies for that investor. Even worse, if an adviser is not aware of the investor’s risk profile, chances are the investor will buy products that help the adviser to gain profit for himself.

Suraj Kole is the content writer at udyot solutions and was previously working in sun solutions as a junior content writer. He is expert in inbound marketing, content marketing, and lead generation.