Building an Investment Portfolio: The Complete Guide

A lot of new investors don’t know the meaning of words like portfolio, portfolio management, etc. If you’re a seasoned investor this blog is not for you. If you’re a new investor who wants to know what an investment portfolio is or how one can build the perfect portfolio; you’re on the right track. Let’s start with the basic questions.

What is an Investment Portfolio?

An investment portfolio can be defined as the whole group of assets a person has invested in. It can include mutual funds, stocks, bonds, securities, property, gold, and other precious metals, etc. However, usually, people refer to Mutual Fund Portfolios and Stock Portfolios using the blanket term “investment portfolio”.

Why is it Important to Build an Investment Portfolio?

As you start investing money in different financial assets, you are automatically building what is called a portfolio. It is, therefore, crucial to consciously invest in a manner that your overall portfolio is well-rounded and does not have conflicting assets or bad mutual funds. When building a portfolio you must think of your emergency funds, short term goals, and long term goals.

Financial Goals and Your Investment Portfolio

Tying up our financial goals with our investment portfolio is important because the two are directly related. You have to adjust your portfolio and build it according to your life goals. Other factors to take into account while doing this are your age, risk tolerance and time horizon. As a young investor, your aim may simply be to save for short term goals such as a car or a fancy holiday. However, as you grow older you may start thinking of saving for life events like weddings, your kids education or even retirement. Therefore, there is a direct correlation between your financial goals and your investment portfolio.

Determining Your Asset Allocation Based on Risk Tolerance

If you are wondering what the phrases “risk tolerance” and “asset allocation” mean don’t worry. These are simple concepts that can seem intimidating when you are a new investor. Risk tolerance simply refers to how much risk you are willing to take as an investor. This is not just a function of your own emotional decision but should also be based on your age, income, and expenses. Risk tolerance is broadly broken down into 3 main categories:
  • ConservativeLow market risk + low returns

  • ModerateMedium market risk + decent returns

  • AggressiveHigh risk + high rewards

These risk levels are often broken down further into moderately conservative, moderately aggressive, etc. You can easily find the right risk level for yourself and invest by using the MF QuickSIPs feature on the Cube Wealth App.

Steps to Set up Your Perfect Portfolio (How to Build a Good Investment Portfolio)

To build a Perfect Portfolio you will need to speak to a wealth coach who can understand your financial goals and help guide you to the right investment options. You can also explore the perfect portfolio feature on the Cube Wealth App to do this yourself. For further details on this topic please read: How to Build the Perfect Investment Portfolio
Or you can watch this short video:

FAQs (Frequently Asked Questions)

Q. How many funds should I have in a portfolio?

Ans. There is no fixed number of funds one person must have in their portfolio. However, having too many funds is generally not a good idea. It is best to pick a few quality funds and then invest in them. A Cube Wealth Coach can help guide you and help you pick the right mutual funds. You should not pick mutual funds on your own – always get an expert wealth advisor to help you with this.

Q. How do I choose the funds for my portfolio?

Ans. You should now choose mutual funds for your portfolio on your own. There are a lot of different factors that have to be taken into account to build your portfolio. You have to align your investments with your financial goals, think of balancing your portfolio, understand the debt-equity ratio you want, liquidity of the funds among other factors.

Q. What does an investment portfolio look like?

Ans. A good investment portfolio generally has quality mutual funds picked by expert advisors. Stocks based on proper stock analysis and value investing approach. An investment portfolio can also include alternative investment assets.

Q. What are the various types of investments?

Ans. There are multiple investment options investors have in India today. You could invest in stocks, bonds, mutual funds, alternative investments such as P2P Lending, digital gold, physical gold, etc.

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