Skip to main content

Building Investment Portfolio

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

Building a great portfolio of mutual funds is both easy and simple, provided you follow this step-by-step method

 

What is a portfolio?

 In a general sense, all investments held by an investor are collectively a portfolio. But to the thoughtful investor, a portfolio must be something more.

 

A portfolio is a group of investments that are meant to serve a single goal. Each distinct financial goal must have a distinct portfolio dedicated to it. Why is this so?

 

Have separate goal-oriented portfolios


You need a distinct portfolio for each goal simply because you will need the money at different points of time, and probably have different risk-reward requirements for each goal. As an illustration, think of a 35-year-old investor who needs to buy a house two years in the future, needs to pay for a child's professional education seven years in the future and save for retirement 25 years in the future.

 

A two-year horizon means that her risk-tolerance (and therefore equity exposure) should be very low. The seven-year horizon for the child's education could justify a somewhat higher risk but since this expense cannot be postponed at all, the risk cannot be very high. In contrast, the 25-year horizon for the retirement fund means that a high risk can be tolerated, especially since beating the compounded affect of inflation over such a long period will need good returns for a good number of years.

 

There is simply no way of creating, tracking and managing a single portfolio that could serve multiple goals simultaneously. If this investor has a single lump of money that is treated as a single portfolio, then she has no way of setting and following the correct risk level for each part of the money.

 

Each goal needs a different amount of money and will need to be liquidated at different times in different ways. It's clear that the only sensible way to invest is to have different portfolios for each financial goal.

 

Decide on an asset allocation


The next step in building your portfolios is to figure out the way it should be split between different types of investments. This has to be done at two levels. At a higher level, you need to decide how much to invest in equity funds and how much in debt funds. At a more micro level, you need to allocate your money between different kinds of equity and bond funds.

 

The first thing to understand here is that there is a distinct time band that is suitable for each kind of fund and if you do nothing but just match each of your portfolios' expected life-span with a type of fund, most of your task is done. At the broad level, money that is needed within the next three to five years must be in debt funds while money that is going to be needed after that can mostly be in equity funds. Very long-term money--something that you are absolutely certain will not be needed for more than ten years--should all be in equity funds. Over such long periods of time the risk of investing in equities--or at least that of investing in a good equity fund--is minimal--and the rewards you can expect are high.

 

The flip side of this purely time-based asset allocation approach is that it implies that long-term money must be actively reallocated when it becomes short-term. When an expenditure item is fifteen years away, you may put its portfolio entirely in equities, but ten years later, when only five years are left before that portfolio has to be encashed, the original all-equity allocation becomes dangerous. At that point, this portfolio is effectively a five-year portfolio and a substantial part should gradually be shifted to debt.

 

The conventional way of deciding asset allocation that many investment advisors follow is to treat investors' entire investment as a single portfolio and then decide on an asset allocation based largely on the investors' age and perceived risk appetite. This is inappropriate in most cases. The correct asset allocation has a lot more to do with what you intend to do with the money than on your age. For example, take the typical retirement portfolio. Conventional thinking suggests that very little risk can be taken with one's retirement portfolio. An investor with a couple of years to go for retirement is almost always suggested an all-debt portfolio. However, in our way of thinking, this is a mistake. A retirement portfolio isn't something that is going to be spent off in a day. Instead, it is a pool of money that is going to be needed for a long-time, perhaps till the investor turns 90 or so.

 

This means that not only does a part of the money is actually very long term, the returns on the money must be good enough to counteract the compounding effect of decades of inflation.

 

If you retire at the age of 60 and put away all your money into a safe debt-based investment that underperforms inflation by just two per cent a year (not impossible in these times of low interest rates), your money will be worth almost 47 per cent less by the time you are 90!

 

It turns out that 'safe' investment is actually the most dangerous thing you could have done with your hard-earned retirement fund. Thus, a realistic appraisal of your own financial needs is the most important part of deciding on your asset allocation. Once you have done that, the rest is easy.

 

One temptation one must never fall into is to decide on asset allocation by trying to time the financial markets. If you look at the history of Indian financial markets, you can see distinct periods when either stocks were generating great returns or debt was generating great returns.

 

It's easy to imagine the wonderful returns that one could have generated by being completely in the right kind of asset at the right time. However, this is 20:20 hindsight. In practice, it is almost impossible to predict things accurately enough to profit from market timing.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...

ICICI Pru Constant Maturity Gilt dividend

Invest ICICI Prudential Constant Maturity Gilt Fund Online ICICI Prudential Mutual Fund   has announced dividend under the following schemes: Scheme Dividend ( R /unit) ICICI Pru Constant Maturity Gilt-DQ 0.26543239 ICICI Pru Constant Maturity Gilt Direct-DQ 0.27171609 ICICI Pru Q Interval Plan I-D 0.10617296 ICICI Pru Q Interval Plan I Direct-D 0.10703967 ICICI Pru Q Interval Plan I Ret-D 0.10617296             The record date has been fixed as June 13, 2016.   ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) ...

SBI MAGNUM MIDCAP ONLINE

Invest SBI MAGNUM MIDCAP ONLINE   SBI MAGNUM MIDCAP fund didn't fare well in its initial years but, in recent years, has steadily improved its performance under the capable hands of its current fund manager. Although investing predominantly in mid-cap stocks, the average market capitalisation of its portfolio is lower than other category peers.   Although the stock selection approach is mostly bottom-up , the fund manager doesn't shy away from taking bold sector bets , as is reflected in its large exposure to the healthcare sector. She is equally adept at handling performance across market cycles--the fund has captured more of the upside during market upticks and contained the downside during downturns in a better manner than its peers.   Given its superior risk-reward equation, the fund is a worthy pick in its category.     ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing EL...

Sundaram Mutual Fund new plan Sundaram Fixed Term Plan CJ

Sundaram Mutual Fund has announced the launch of a new fund named as Sundaram Fixed Term Plan CJ. The new issue will be closed for subscription on January 30. --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.   Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   These Application Forms can be used for buying regular mutual funds also   Some of the best Tax Saving Mutual Funds available are: 1. HDFC TaxSaver 2. ICICI Prudential Tax Plan 3. DSP BlackRock Tax Saver Fund 4. Birla Sun Life Tax Relief '96 5. Reliance Tax Saver (ELSS) Fund 6. IDFC Tax Advantage (ELSS) Fund 7. SBI Magnum Tax Gain Scheme 1993 8. Sundaram Tax Saver   -...

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...
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