ASSET ALLOCATION LESSON FROM MOTHERS

05 Jul 2018

ASSET ALLOCATION LESSON FROM MOTHERS

Recently when I visited my uncle’s place it  left me with no doubts that mothers are nothing less than complete institution for  what modern financial institutes are not been able to teach, mother teaches certain lessons simply. Succeeding paragraphs made me to come to this conclusion.

I am working as an investment adviser, and my uncle’s portfolio which was predominantly into real estate was not performing due to bad market conditions since long.  We discussed for long about  his strategy of focusing only on real estate was wrong, although this investment has given him good appreciation but now when he actually want to sell it to use the money for higher education of his children he could not do it due poor liquidity of real estate and not getting the desired price. We debated a lot on how proper asset allocation as per risk profile could be a winning strategy.

Nevertheless, my aunty came shouting that now discuss everything while eating food, so we sat on dining table, and my mouth went full of water when I saw the variety of food preparations. My aunty must have worked hard for preparing that meal. I asked -“Aunty, what was the need of making so many preparations. She simply replied “you are a growing young boy don’t ask so many questions, to keep yourself healthy, your body needs every nutrition in ample quantity. So just eat it, and eat well, don’t feel shy.”  There were number of green vegetable preparations, salad, curd, rice, pickle, sweets,chapatti, papad etc. My aunty added “in order to be healthy you need to have variety of nutritious food in balanced quantity- so eat well”. To this monologue I promptly said-”uncle you are not getting a concept which aunty is so clear about, she will prove out to be a better investor than you if given a chance,because she understands that a basket of different food is required to keep one healthy similarly to keep one’s financial health in proper state, a well-diversified asset allocation is of prime importance.”

There is an old saying-“Never keep all your eggs in one basket”. This saying aptly suites the outcome of my uncle’s position on keeping all his assets at one place i.e. real estate. Surely my uncle must have got the lesson and I believe after reading this small incident,you would have made your mind to diversify your investments.

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