How can one allocate funds to different investment class?

Q: What are the different investment avenues that you recommend to investors? We know the basic that there is fixed income, equities, real estate and gold, but how do you advice people to allocate their funds. You said that when you are starting off you need to save. You can take your choice of saving instrument. According to you what is the best in terms of liquidity and some amount of financial mobility that you can keep?

A: There are two ways to look at it. One is a very simplistic way, let me do it myself. The other is the financial planning way. The 'let me do it myself' ways will be divided into some simple products and then complex and then very complex kind of products. Simple products like your bank deposits, your PPF, your postal deposits. Complex means you could be investing into mutual funds. All these things give you pretty high amount of liquidity. Some very complex products are like Unit Linked Insurance Plans (ULIP) and long-term insurance contracts where you are locked in for a long-long time and often we have seen that the insurance products do not really perform and they do not perform because there is a reason of their non-performance, because they are supposed to perform only that way. So it is really your mistake by going and putting money into those products. However, on a financial planning side of things when you start looking at them then a planner will essentially break your pockets into various sections. For each goal, the timeframe of each goal will decide how your investment will happen. So if you have a timeframe for a goal which is three years then your investment will really be in a safe product, versus if you have a goal which is 15 years ahead you can afford to put all your money for that particular goal into maybe in equities which is going to be volatile, but then historical evidence of last 20-25 years shows that you will still make your 15-18 percent which is by far the best thing to do. So if you have to create wealth then the summery is that you get into stocks, that is the stock market and you get into the real estate market. If you want to conserve wealth then you do your gold and you do your bonds and fixed deposits and then if you just want to completely play safe and not take any risk then you can maybe stay with liquid funds and your savings account, as simple as that.