Portfolio : A collection of investments owned by the same individual or organization.
Will : legal declaration of how a person wish his/her possession to be disposed after their death
Fund : An amount of money saved or collected for a particular purpose
Return : Profit or loss derived from an investment
Investor : An investor is any party that makes an investment.
It is a type of pure insurance plan where the beneficiary will get the benefit only in case of death of the policy holder during the policy term.
Difficulties occurred due to a situation/calamity.
It is Total Assets of a person at the given point of time. That is buildings, investments and other assets s/he is having. Benefits will be enjoyed by his heirs after his death through his will.
A set of assets which an investor holds. This may contain equities, mutual funds, insurance and other cash equivalents.
It is the raise in the value of Consumer Price Index. That is the rate of increase of the price of a goods or services.
It needs a perfect recipe for a dish to taste good and the best cut will give the suit the right fit. It is no different for investments, the correct mix of investment options goes on to create the coveted portfolio which optimizes returns and minimizes risk.
For investors, it might sound like a fairy-tale to get the perfect portfolio every-time. There is a lot of dynamism in the market and factors keep changing all the time. What might be good today may not be so after a year. Due cognizance needs to be taken towards the volatility of the market and the overall economic outlook which provides the outline for a good investment portfolio.
It is an art to get a perfect integration of investment options like Fixed Deposits (FD), Mutual funds, Gold and Real estate. While deciding on the options it is important to be guided by the basic parameters like efficiency, diversification, risks and returns, and the overall costs. It is against this backdrop that the above stated options have been analyzed.
Ingredients for the Portfolio
Fixed deposits with banks or Bank FDs are ideal for investors with low risk appetite. It is best suited for periods up to one year or less. This is offered by banks for a minimum of 30 days but the best time frame for investment is between six months and one year. While investing in fixed deposits it has to be remembered that premature withdrawal can attract penalty so the horizon for investment needs to be finalized beforehand. When markets experience volatility FDs are the best place to park funds. Though the returns, post tax could only be around 7%, FDs’ would safeguard against erosion of capital.
Investors can set aside a percentage of their corpus for investments in FDs. The actual percentage which is to be invested will depend on the market condition, propensity for risk and the overall investment plans.
Mutual funds are one of the most exciting investment options available. They can provide both stability and growth. It provides small investors with an opportunity to make investments in an array of stocks which are under one fund umbrella, and they are handled by a professional fund manager who invests in the market based on a number of parameters. The major benefits of mutual fund investments are that they provide a safety blanket to investor funds. Diversification is offered and the funds are handled by the fund manager in a transparent manner.
For this option too, the percentage of corpus to be invested will depend on priorities, the stage of life in which the investor is and of course the risk propensity.
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Insurance schemes offer you a perfect risk management plan. Online term insurance provides cover against the financial loss of sudden demise of the breadwinner. Health insurance policies take care of the unexpected hospitalization expenses. Property Insurance covers you from the risk of any natural perils destroying your property.
Inflation is a deterrent or a disincentive towards certain investment options. Gold is one option which hedges against inflation. Over a period of time the return on gold investments equal the rate of inflation. Experts feel that the value of gold is inversely proportional to the value of equity, so when the value of gold escalates, the equity market is in recession, as has been seen in 2007.
As in some of the other investment options available, gold as a component in the investment portfolio helps to reduce the impact of market volatility.
Investment in real estate is for those who look for long-term gains. Investing in a property in India has generally been very profitable. There is a burgeoning need for real estate properties over the last few years. Investment into real estate is likely to fetch good returns for the investor in the long run regardless of the short term stagnation.
There is no single formula to get the best returns out of your portfolio. The kind of returns one wishes to achieve may vary widely based on the risk taking ability. The priorities of life will also change the ratio of the components of the portfolio.
Each situation is unique and the individual investor has to decide his exposure in the particular class of asset. Judiciously customized mix of the various options discussed above will provide the best opportunity to maximize returns and minimize risks. To make all the successful investment principles and techniques work in your favour, you may test-drive our services by opting for
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