Months ago I tried making Chapati(a form of Indian flatbread). Apart from my usual difficulty in making it round, I did have some thoughts about asset allocation – linked to the process of making it.
Read on to learn how to make Chapati and also learn something about asset allocation. 🙂
How to make Chapati
The Chapati is an interplay between 2 ingredients, water and wheat flour. Getting these 2 things wrong will simply not cut out. Then 2 more ingredients oil and salt too play their roles too but not as important as the other 2.
In my case, I started off 5 tablespoons of wheat flour, 2 tablespoons of oil and 2 tablespoon water. And pinch of salt. During mixing process itself I knew I had done a mistake, and added 3 more tablespoons of flour, and a little sprinkling of water to get the consistency right.
You come to know the right consistency, when the dough doesn’t stick to your hands, nor it drips oil. The oil will drip if it’s in excess, excess water will make the dough sticky. Excess flour will make the dough brittle. Same is true with asset allocation too, which will be discussed in the next section.
After preparing the dough, the next thing was rolling it rounded shape (the most difficult part of it). To roll it, I dusted both the board and rolling pin with flour, so that dough doesn’t stick to these. Also sprinkled some flour between the layers to prevent sticking with each other. The thing to note here is that the flattened dough is not too thin to tear up easily nor too thick making it impossible to cook it. This judgement depends on the size of dough balls you make. A similar judgement is also required in deciding about investment amounts for a goal.
Asset allocation and its link to Chapati
Similarly, optimal asset allocation is dependant on equity, fixed income, gold, cash. All these in proper proportions gives one happy home environment, as well as attainment of the set goal. Each component of chapati adds to overall characteristics of the dough. The portfolio needs optimal quantities of equities, fixed income instruments, gold and emergency provisioning, cash. Though the allocation starts off with 60% equities, 35 % fixed income and rest 5% split between emergency provisioning and cash. But this starting point is not fixed in stone. The condition of dough determines whether you need to more of any component. The goal determines the asset allocation one needs to have. That is the reason why RIPFPI is uttered.
The preparation of chapati from dough balls and setting up of goal apparatus is similar. Freefincal calculators and independent trackers are used to ensuring the dough doesnt stick to the tool. Replaceability of tracking tool is important. Apart from tracking tool the next thing to set in motion is implementing it. There will be hiccups in implementing goals, which you have to deal on your own. AIFW is of great help in these kinds of circumstances not for choosing the fund to invest in.