Skip to main content

Building portfolio - Basics

 

   Savings and investments are the basic steps in an individual's financial planning process. There are various options available in the market, and it is very important to plan and select the right investment instruments in order to get the best returns. It is advisable to start saving and investing as early as possible. It is also very important to allocate some of your time to planning and tracking your existing and planned investments. You cannot have all you plan for in your investment portfolio on day one - you need to build the portfolio slowly over time, and focus on diversification of instruments too.


   The first step is to identify your objectives. The objectives can be simply classified as short-term needs such as tax saving, insurance, buying some asset etc, and long-term needs such as a property, marriage, children's education, retirement etc. The next step is to identify your risk appetite, which is basically your capacity to bear loss on investments. Risk appetite is unique to each investor as it depends on various personal factors such as age, stability in earnings, financial background of the family etc.


   These are some of the broad categories of investment instruments that are available in the markets:

Tax-saving instruments    

It is important to plan to reduce your tax liability. The Income Tax Act specifies certain investment instruments that attract a rebate in income tax. For example, provident fund, NSC, infrastructure funds etc. However, most of these tax-saving instruments come with a long lock-in period. You can choose some of these tax-saving instruments to invest in.


   Investors with a low risk appetite can invest in debt based instruments like PPF, NSC etc, while investors with a high risk appetite can invest in a mix of tax saving mutual funds, PPF, NSC etc.

Insurance instruments    

It is important for everyone to have an adequate insurance cover on life and health. Analysts suggest an investor should have an insurance cover that is at least 5-8 times his annual income. On the other hand, you should have adequate medical cover as well for yourself and your immediate family members.


   Insurance schemes taken at a lower age come with lower premiums and therefore it is advisable to go in for adequate insurance cover during the early part of one's earning years. Unit linked insurance plans (ULIPs) are a good option to bundle one's investment and insurance needs.

Liquid and debt instruments    

Debt-based investment instruments are 'low risk and low returns' options, and provide for capital protection. Debt instruments are good for short and medium-term investment plans where investors are looking for liquidity. You can look at investing in various debt based investment instruments based on your needs.


   Some options are bank savings deposits, bank fixed deposits, debt based mutual funds etc.

Gold    

Investing in gold has gained popularity in recent times due to the lucrative returns. Gold-based investments add another dimension to a portfolio. It acts as a debt instrument and usually provides good returns during uncertain economic conditions. You can look at investing in gold either through the metal itself or through units of gold exchange-traded funds (ETFs).

Equity-based instruments    

You can invest in the equity markets either directly in stocks or through indirect options - equity-based mutual funds. You can identify investment opportunities with some basic analysis. Ideally, only investors who have the time and understanding of markets should look at the direct stock method. Others should look at investments through funds managed by various fund houses.

 

Popular posts from this blog

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

8% Government of India Bonds quick guide

For those seeking comfort in safety of returns, the Government of India issued 8% savings bond once again comes to the fore. First launched in 2003, these bonds are issued by the government with a maturity of 6 years. The bonds are available at all times with specified distributors through whom you can apply to invest in them. Here is a quick guide to what the bond offers and its features to ascertain to check for suitability. What are Government of India bonds Government of India bonds are like any other government bonds with specified rate of interest. The rate is fixed at 8% per annum paid half yearly, or you can opt for cumulative payment of interest at the end of the tenure. You can buy these bonds from State Bank of India and its associates, other nationalized banks and some private sector banks such as HDFC Bank Ltd and ICICI Bank Ltd, among others. The bonds can be bought from the offices of Stock Holding Corporation of India as well. They are available in physical form onl...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now