When we do investments sometimes they are ad hoc or sometimes more planned via the way of monthly SIPs. But either way, reviewing one’s portfolio on a timely basis is crucial. But what parameters should be considered while reviewing? What is the benchmark that we need to set it up against? In short, how do we build the perfect portfolio? If you have wondered how to reach the state of portfolio nirvana, then this is exactly the article that you should read. We are listing down 4 pointers that will help you review your current portfolio or even help you build a new portfolio; a perfect portfolio.
We have heard that dialogue, “Filmein sirf teen cheezo se chalti hain, Entertainment, Entertainment, Entertainment. Similarly, a perfect portfolio is made by only one thing – Diversification, Diversification, Diversification. This cuts down your risk and allows you to benefit from the rally of each type of investment category.
2. Go Direct
Mutual funds are of two types namely – Regular and Direct. In Regular plans of mutual funds, a chunk of your investments plus returns is going to a broker whether it is an individual or an institution. Opting for direct plans of mutual funds helps you to save on commissions and gives you higher returns on the same portfolio. If by one switch, and doing nothing else, we are getting more from our investments, why wouldn’t we go for it? There are many online platforms like moneyfront.in etc that make switching your portfolio very easy. Do it now!
3. Don’t ignore taxes
Do you know that not all returns on investments are tax-free? Basis different categories of investments different levels of taxations get applied. We are not just talking about doing investments towards saving tax for eg. ELSS that give you deductions under section 80C of the income tax act. We are asking you to evaluate the tax impact that you will have from your main source of income as well as from the returns you generate from your investments. After-tax deductions if what you get don’t beat inflation, you are moving backward than forward.
4. Align your goals and risk appetite
When you get into a vehicle, you know what your destination is going to be. You might make a few stops in between or even take a detour, but your end destination shall remain the same. Similarly, start with a goal in mind before investing. This will help you stay on track and not invest randomly or in products that won’t benefit you. Also analyze what your risk appetite is, that is, what is your risk-taking ability. If your risk-o-meter says that you are averse to taking risks, then invest in relatively low-risk investment products that safeguard you and your portfolio. The point to remember here is that working towards a goal brings in discipline and your risk appetite measurement keeps you from taking wrong investment decisions.
We are confident that if you follow these 4 points, then your portfolio will shine and sparkle. Tweet to us and let us know which pointer did you apply towards building a healthy and wealthy portfolio?