Asset Allocation--

Every rational investor seeks for an efficient portfolio(highest return from a given level of risk), in theory we come upon a certain percentage allocation for equity-based and fixed income assets that,put together, should generate a return commensurate with the amount of risk we are comfortable with.Investors are generally categorized as risk averse or risk takers.In reality,there are many grey shades along the risk-return spectrum and re-examining the investor's asset allocation defines his place on the spectrum.While asset allocation may not be the sole driver of long term performance,but it does define the range of returns and volatility within which a portfolio is expected to perform.Risk return clustering occurs at each level of asset allocation.WIth an increase in the proportion of equity in the portfolio,the dispersion of return as well as risk increases(due to the volatility of equity returns).Of course the risk and voltality can never be predicted but better the quality of the fund selection,higher the probability to get better returns.

Riak profiling is major and important step whereby an investor's capacity for taking risk is fleshed out and articulated and many investoors would find that that thier actual portfolio is not in line with their expectations.By modifying the ratio of fixed income to equity an appropriate risk return profile can be attained.

Asset allocation isn't a one time phenomenon.An investors requirements will naturally change with age ,income level etc. and these changes will be reflected in the asset allocation.Yeah but for long term investments definitely it remains unchanged.The benefits of risk profiling and asset allocation becomes apparent over a period of time for both investors as well as advisors.An ideal case orf efficient portfolio is a hypothetical construct that a few can achieve in the real world.But it bring investors as close as possiblle to their own best case scenerios if not the ideal ones.It also helos in cementing long-lasting customer relationships.