6 Steps to create an Investment Portfolio


6 Steps to create an Investment Portfolio

Before investing your hard earned money (Monthly pay or Business) in any investment product, there are four key elements that you have to mind. They are the essentials of an Investment Opportunity.

  • Needs and Wants
  • Financial Goals
  • Goal Period or Investment Duration
  • Expected returns (Interest rate) %

Simply putting your money in a Bank Deposit account or blindly investing in Equity – both will hurt you in the long run. One should consider the said above four elements to stay invested.

For example, if Mr. X have a Financial Goal to buy a new house after 5 years. So, his wants or needs are considered here as, ‘New House’. Generally, it is a Financial Goal. The Goal Period is about 5 Years. Finally he or she have to find the appropriate investment avenue to reach his 5 Years Financial Goal.

On common, one should take less risk in a shorter period and take a moderate to high risk in the longer term to fulfill his Financial Goals. Even if the risk is high for the Long term goal, it will fetch good returns in the long run.

There are 6 Basic Steps to create an Investment Portfolio,

  • Create a Financial Goal(s)
  • Identify the Investment Opportunity
  • Asset Allocation
  • Periodic Review on Investments
  • Reshuffle, if hardly need to change
  • Exit on or before Maturity (Goal Destination)

As we have already said in the first step, creating a Financial Goal with proper time and expected returns are important. In the Second step, we need to identify the investment avenue (Opportunity) based on our Goal period and the expected returns. If there is a Five Year Financial Goal and the expected return is around 8 Percent to reach the Goal. Then there is no need to invest in Direct Equity or Equity oriented Funds. One can take a lower risk to achieve his Goal.

While investing in the long term, one should make use of Asset Allocation. You can invest in Equity, Debt Funds and add a little in Gold, Banks or Real Estate investments or any other alternative avenues. Usually, when the Equity is going down, then the Gold price will rise. When bank rates are falling, then the Bond yields are getting higher.

In the long run, one should consider to make a review on his existing investments. Therefore, be prepared for Timely Change. If there is a need to change in any funds or investments, make of it in quick time.

Reshuffling your Investment portfolio is important, when there is a negative scenario in a particular avenue. Sometime, you can get a better opportunity to earn with low risk. If your Goal amount is going to reach before the prepared duration, you can withdraw that money in full and transfer into a Save Deposits or Very low risk products.

There is a possibility of Market Crash or Recession time when your are near or reach your Financial Goal. So, it is important to avoid the loss – otherwise, it will hurt you more. There is no need to wait till the Goal Date (Destination Period).

Kindly share your views / comments with a smile 🙂



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