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What is asset location and how is it different from asset allocation? How can you take advantage of this

Highlights

The purpose of asset location is to save more tax than to earn profit.
The purpose of asset allocation is to make money and keep investments safe.
Asset allocation protects you from sharp market volatility.

New Delhi. Asset location is one way to reduce tax. In this, different investment options are selected according to their tax liability. In the asset location, the investor decides which securities will go into tax free accounts and which will be deposited in taxable accounts. With this, he tries to increase the returns he gets after tax. Asset location depends on many factors. For example, the financial position of the investor, tax laws and ability to hold the investment, etc.

To avail this method, the investor should invest in both taxable and tax saving options. Investors who have invested money in equity and fixed income options and have balanced their investments, get the most out of it. However, those who invest all their money in fixed returns or equities can also take advantage of this, but they will not get the same benefit as those who build a balanced portfolio. To understand it simply, the purpose of asset location is to save more tax than to earn profit.

Also read- Want to earn big profits in a short period? Take a look at these options, safe investment and strong returns

What is asset allocation
Its purpose is to make money and keep investments safe. You invest money in different investment options here as well, but in this case you decide on the basis of where you will get more returns and where your money will be safe. The advantage of asset allocation is that if one investment option is volatile, the other may give you stability. such as equity and gold. Amidst the changing market conditions, many times gold goes up and the stock market comes down. This trend can also be reversed. In such a situation, it is better to invest money in one place in a fixed ratio and increase your financial security.

asset allocation fund
There is no fixed pattern of asset allocation. It depends on your ability to take risk and hold the investment. If you have the ability to take more risk, then 70 percent can be invested in equity, 20 percent in FD and 10 percent in gold. If you want to keep the risk moderate, then you can keep this ratio 40:40:20. If you do not want to take any risk at all, then you can invest 70 percent in FD, 20 percent in Equity and 10 percent in Gold. You can change these investment ratios according to your ability.

Tags: Asset allocation, Business news in hindi, income tax, Personal finance

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