Date: 28 Sep, 2022
Have you ever considered how challenging it is find the perfect mix of assets for your portfolio and to maintain track of each and every one of the investments? As they are so haphazard, it might get complicated to even remember the full details of specific investments. That's where the investment managers like us come in. An investment manager like Rockstud Capital chooses from a collection of many asset classes, including stocks, bonds, startups, debt funds, etc. We create an ideal investment portfolio that reduces risk meets your short- and long-term financial objectives and is profitable all at once.
As an individual investor, your success depends on having a well-diversified portfolio, therefore, you must understand how to choose an asset mix that best fits your unique investment objectives and risk tolerance. Your portfolio's ability to provide targeted returns will be greatly influenced by your investing strategy, asset allocation, and portfolio formation among others. By using a systematic process, investment managers can build portfolios that are in line with your investment strategies. Here are the key considerations to making an ideal portfolio:
Depicting Accurate Information: A well-diversified investment portfolio is going to have underperforming elements in a given year or quarter. Therefore, you need to display your goals and learn about their actual risk tolerance. Such needs must be translated into a tailored portfolio constructed with all the necessary due diligence.
Ensure Portfolio Diversity: The best way to create a portfolio of investments is by diversifying. It should include bonds, exchange-traded funds (ETFs), stocks, and mutual funds.
Prioritize the Asset Allocation: The major focus should be on asset allocation and portfolio design. When you have an asset allocation strategy in place, it will automatically assist you in building a portfolio. As you evaluate numerous aspects of your investing goals before choosing an asset allocation, asset allocation helps you develop an ideal investment portfolio.
Organizing Your taxes: The tax savings should be taken into account during the very first step of building the portfolio. When building your portfolio, you should keep your tax planning in mind and choose investments that not only provide tax savings but also higher returns and simple liquidity.
Selecting Ideal Investment Strategy: You might consider whether the key component of your investment strategy should be growth, value, or a combination of both. Although the advisors have the time required to assess the shifting financial and economic situation, the challenge is finding the time to do so.
Although people adhere to the fundamental principles when creating an ideal investing portfolio, they also hold onto a few fallacies that, if they aren't dispelled, can destroy their portfolio. We are here to decode a few of them:
One Optimal Portfolio for All Investments: Most investors believe that only a portfolio is sufficient for all investments. A variety of short, intermediate, and long-term factors interact to determine how well an asset performs. A one-size-fits-all portfolio, however, may fail to take advantage of chances to satisfy certain client demands because there are different levels of investor wants.
All Bonds and Debts are Created Equal: Investors frequently refer to an asset class that includes hundreds of subsectors with various correlations, exposures, and associated risks using broad words like "fixed income" or "bonds."
Impact of Inflation is Irrelevant: Don't let your guard down when it comes to potential high inflation or deflation. Everything, including inflation expectations, is subject to change, so keep that in mind.
Consensus is Solace: One should avoid consensus at all costs. That may be the reason why so many investors follow what others do, particularly when the market is unpredictable.
It Only involves Money Management: Investors now expect more comprehensive services and holistic planning content: Most investors want their advisors to offer comprehensive services beyond money management.
An ideal portfolio for different investors with different risk appetite may look very different:
Low-Risk Investment Portfolio: The low-risk investment portfolio is the one under which there is less at stake (in terms of the significance of the investment to the portfolio or amount invested). It entails making sure that none of the possible losses will be catastrophic in addition to safeguarding against the possibility of any loss. The low-risk portfolio is made up of 15-40% equities. Low-risk investments include treasury securities, including treasury bills, bonds, and notes are all considered.
Moderate-Risk Investment Portfolio: A moderate portfolio (medium-risk) enables you to test out various investment strategies while also allocating some of your assets to secure investments. For a portfolio with moderate risk, you should include a mix of 40–60% risky investments (such as equities) and 40–60% safer investments (like bonds).
High-Risk Investment Portfolio: A high-risk investment portfolio is one that has either a significant percentage probability of losing money or doing poorly or a disproportionately high danger of suffering a catastrophic loss. The high-risk portfolio is generally from 70% upwards. Currency trading, REITs, and initial public offerings (IPOs) are all considered high-risk investments. Additionally, startup investments have the highest risk-to-reward ratio.
Curating an optimal investment portfolio solely depends on each investor's particular preferences, financial objectives, risk tolerance, the length of time they intend to keep their investments, and their asset allocation strategy. Therefore, you should have a complete understanding of your portfolio and as an investor, you can also take the help of an investment manager.
Disclaimer — The article is made for informational purposes only and should not be regarded as an official opinion of any kind or a recommendation. It does not constitute an offer, solicitation or any invitation to public in general to invest in the stocks discussed. This article is confidential and privileged and is directed to and for the use of the addressee only. The recipient, if not the addressee, should not use this material if erroneously received, and access and use of this material in any manner by anyone other than the addressee is unauthorized. It shall not be photocopied, reproduced or distributed to others at any time. While reasonable endeavors have been made to present reliable data in the article, Rockstud Capital LLP does not guarantee the accuracy or completeness of the data in the article. Prospective readers are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. No part of this material may be duplicated in any form and/or redistributed without Rockstud Capital LLP’s prior written consent.
Date: 02 Dec, 2023