5 Elements for Creating a Well-Diversified Investment Portfolio
Gone are the days when FDs, PPFs, and real estate were the only popular investment options. Modern Indians are now looking for newer options for creating a well-diversified investment portfolio. If you are aiming for the same, check out the five elements that you should definitely have in your portfolio.
While Indians have been traditionally known for their impressive habit of saving, modern Indians now understand the importance of investing too. With so many investment options currently available in India, why let your savings just lay idle in your bank account? While options like FDs, PPFs, real estate are great too, there are now even more reliable options that can help you build a diversified portfolio.
So, what are some of the must-haves for an investment portfolio? Let us have a look-
- Direct Stock Investments
One of the best ways to invest your money to achieve long-term financial goals is direct stock investments. There are more than 5,000 companies listed on Indian stock exchanges. Try to understand how you can analyse stocks to pick the ones that can help you generate handsome returns.
When selecting the stocks, ensure that you consider your risk appetite and financial objectives.
IPO or Initial Public Offering is also an excellent way to invest money in the stock market. IPO is when a company launches its shares on the exchange for the first time. As it is the first time that the stock is being listed at an exchange, it is possible for it to rise considerably after the listing.
But make sure that you only invest in IPOs of companies that are financially strong. Start with a small amount and get some experience to understand how IPOs work.
- Mutual Funds
The next important element is mutual funds. There are now many different types of mutual funds in India. Some of the most popular options are equity funds, debt funds, ELSS funds, and balanced funds. All the different types of funds have different levels of risk.
Know what these different types of funds are and how to match them with your objectives to make the right selection.
- Gold ETF
ETFs or Exchange Traded Funds are generally index funds which closely replicate the price performance of the underlying asset. You can trade ETFs just like stocks on an exchange during the market hours. Apart from index ETFs, you can also find bank and debt ETFs.
An increasing number of investors who want to invest in physical gold now prefer investing in gold ETFs. When you buy gold ETF, you do not receive any physical gold but just a contract which is backed by the metal. When you sell the ETF, you receive the cash equivalent for the same.
Bonds are a type of borrowing and thus represents debt obligation. When you purchase a bond, the amount invested is given as a loan to the bond issuing entity. Once the bond tenure is over, the issuing entity will repay the amount along with interest.
There are government bonds, corporate bonds, asset-backed securities and more. When combined with high-risk BSE or NSE stocks, the bonds can bring in the much-needed stability to the portfolio.
Diversify Your Portfolio
Diversification is the key when you are trying to create an investment portfolio. Your portfolio should be able to benefit from all the different types of markets and stabilise itself if at all any of the markets underperform. If a well-diversified portfolio is what you are aiming for, these are the five elements that you should surely consider.