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How to Make Your Financial Portfolio?

Here are a couple of tips and techniques to build your financial portfolio. Portfolio as per your risk appetite and the amount you can save regularly.

  • 5,472 Views | Updated on: Dec 28, 2023

A well-diversified financial portfolio is crucial to meeting the success metrics and achieving your financial goals. As an individual investor, you need to determine an appropriate asset allocation that is profitable and suits your investment goals. Investors can build portfolios aligned with different investment strategies by following a systematic approach. Making an investment portfolio can seem intimidating for beginners, but the earlier you begin investing, the better will be the outcome.

Risk assessment is crucial to minimize the risk and gain profitable returns even if you’re investing in a market-linked insurance plan. Then, investors can invest according to their risk-taking appetite and financial goals.

Let’s dive deep to understand how to make your portfolio!

How to Create Your Financial Portfolio?

Building a financial portfolio will help you grow your wealth but also help you cultivate a discipline of saving for the rainy days. Such a disciplined savings and investment approach can help you build an emergency fund, save for that bike or plan your home EMIs way before time.

Determining Appropriate Asset Allocation

The first and foremost rule of building a portfolio is to allocate the investment between different assets like stocks, bonds, government securities, insurance, cash, etc. You must consider three critical aspects of asset allocation, which include:

  • Financial Goal
  • Investment Horizon
  • Risk Tolerance

Clarifying your current situation, future needs, and risk tolerance will help you determine how your investment should be allocated. However, the possibility of greater return comes with a greater risk of losses. On the other hand, you should not forget about your family’s well-being too. So hence, it is important that you also subscribe for term insurance plans basis your family requirement.

Achieve the Portfolio

Once you have determined the asset allocation, you will have to divide your capital between the different assets. There are numerous ways you can go about choosing the investments and securities to meet your asset allocation strategy, which include:

  • Stock Picking
  • - You must choose the stock that satisfies your financial needs and the level of risk. It is better to research, choose a few good stocks and then see if these are a good pick. Do not risk such investments based on rumors and “tips” on WhatsApp or other unofficial channels.

  • Bond Picking
  • - While selecting a bond, you must check several factors like coupon, maturity, bond type etc. It is good to invest in government bonds as they tend to offer good returns and lesser risks. But, again, ensure that you know lock-in periods, if any, and other conditions.

  • Mutual Funds
  • -These are available for a wide range of asset classes and allow the policyholders to hold stock and bonds that are professionally researched and selected. At the same time, remember that these are long-term investments and should not be touched for at least 10-15 years. Starting with Systematic Investment Plan (SIPs) can be a good route for beginners.

  • Exchange-Traded Funds (ETFs)

Are the best alternative in case you do not want to invest in mutual funds. It covers many asset classes and can help round out your portfolio.

Reassessing Portfolio Weightings

Once you have established the portfolio, you need to analyze and rebalance it to ensure that price movement does not affect the weight. To assess asset allocation, you need to categorize investments and determine their value. The other factors likely to change over time include current financial situations, future needs and risk tolerance. Therefore, you need to adjust your portfolio with these changes.

Rebalancing Strategically

Once you have determined which securities to reduce and how much, you can buy the underweight securities and sell the overweight ones. Again, analyst opinions and research will help you make an informed decision.

The financial portfolio is a more prominent subject, and there is a lot of research goes into building a good and profitable one. The steps we discussed simply towards a common idea called diversification. When you diversify your finances between different assets, you ensure you never lose your money.

You might earn well from your bonds during bad days in the stock market. This way, you know that your holdings are consistently making you something which will keep you going. Apart from this, your patience will also play a significant role in earning good returns. For example, mutual fund investments are long-term. If you give in to the emotions, you will make a loss and then lose your money.

We hope now you have an in-depth idea about how to make your financial portfolio. Then, it’s time to start investing in your future! First, however, remember that investing is risky by nature, and there’s no guarantee that your investments will be profitable.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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