Error of omission vs error of commission

Rather the former than the latter

- SHYAMALI BASU

“A man is known by the company he keeps.” This statement can extend to many facets of our lives. Sometimes, people ask for book or movie recommendations, and our logical question is – ‘What do you enjoy reading or watching?’ Based on their reply, we recommend something accordingly.

Similarly, we pick cues about people in how they speak, dress, behave, etc. It wouldn’t be wrong to say that their personality reflects in almost everything associated with them.

The logic extends to your investment choices too. The first set of questions you ask a person asking for investment recommendations are: Are you conservative or a risk taker? Are you nervous about volatility, or are you calm during market correction?

Even though there is no thumb rule, we normally expect an aggressive portfolio for a younger investor and a more debt-heavy portfolio for a person nearing retirement. Even within the asset classes, one expects a higher large-cap allocation in a more stable portfolio than one does in a plan for a youngster.