Your financial portfolio should reflect your goals

Written on Thursday, August 27, 2015
By Mr. Vishwajeet Parashar- Senior VP & Group Head - Marketing, Bajaj Capital Ltd.

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Picking a right investment option for yourself is a complex task and hence as an investor you generally adopt schemes or funds that your friends or other family members have invested in. But, in this process we often ignore the fact that the portfolio wasn't designed specifically for you. Are your investment goals same as your father, what your peer group has or what your colleagues at workplace have? Not necessarily. If your investment needs are unique then your portfolio should reflect it. In this blog we will explain how to construct a goal based portfolio.

Try to list out your goals and then proceed by answering few questions-

1. Based on your goals, when you require your money?

Time-frame is definitely an important factor while creating an ideal portfolio. In case you have short term goals you should not take the risk of investing in stocks but if you need money after 10, 20, 30 years you should consider investing in equities. To be on a safer side and to avoid the volatility of market we would advise taking the SIP route. For the short term needs you can go for Company Fixed Deposits as they provide better returns compared to the FDs offered by private and public sector banks. Alternately, you can invest in government bonds, treasury securities and fixed maturity plans (Mutual Funds).

2. How much are you willing to invest?
After excluding your basic monthly expenses, the amount you are willing to invest will explain the next factor which is your risk taking ability. If you are investing a small amount every month and you have a goal to achieve, you would need to chase funds offering higher interest rate. In this case your risk will obviously be higher but if have a sufficient savings every month you should balance your investment by going for a mixture of equities, debt funds, bank fixed deposits and also few government securities offering assured returns.

3. What is your risk appetite?
Your risk attitude has a lot to contribute in your portfolio construction. If we club together your capacity for loss based on your personal position, your need for returns, investment goals and your personal attitude to risk, what comes out is your risk appetite. Based on the risk attitude, it is very important to understand what category of investor you are. Read our earlier blog 'Know your Risk Appetite' to get more idea about the subject. However, the risk is not a challenging job if you strike a right balance between the three factors comprising your appetite.

Now you have a portfolio which is uniquely designed to meet your goals. But, this is not the end, it is just a new beginning and hence your portfolio would need timely improvements (review). If a fund is constantly not performing, do not linger to it. Switch to funds with good track record. Keep a good mixture of equity, debt and balanced funds. Keep 5 to 10 percent of your portfolio loaded with something different, which is unusual and falls under high risk zone. This might sound awkward but let me explain why this suggestion is being thrown. At times investing in a particular fund which is non-performing has the potential to surprise you over a period of time and it should be included. Adding such colors might pay off and that too in a happily surprising manner.

Take comprehensive 360 degree financial assessment offered by Bajaj Capital that would help you invest right and make your goals easy to achieve.

#Mutual Fund investment is subject to market risk, please read the scheme document carefully before investing. Nothing in this blog is intended to be a recommendation to buy or sell any futures or options market. 

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