Many say that there is no such thing as the perfect portfolio and that is true to a great extent. This is true because no one’s goals and risk taking capacity are the same. What works for one person may not work for the other.
So what are we doing here? How can we tell everyone how to build a profitable portfolio in one go? Well, we can’t. But what we can do is give you some basic advice, which you can then align to your goals and risk profile. Thus building a portfolio that might work wonders for you!
So let’s have a look at what you need to keep in mind while building a portfolio:
Table of Content
Risk Tolerance in Portfolio
Risk taking capacity of every individual varies and is decided by a number of factors. The major factors at play being –
- How long do you wish to invest?
- What is the amount you are willing to invest and predict future additions and withdrawals from the same?
- What is the reliability of income from sources other than your investments?
Depending on the answer to these questions you can decide whether to invest in high risk mediums or low risk ones.
Risk Diversification in Portfolio
Talk to any investing expert and they will tell you diversification is what makes a portfolio well balanced. No investment is immune from market risk and over the long term, some of your investments may fall. So how do you deal with this risk? By not putting all your eggs in one basket. Diversification helps you cover your losses from one investment with the profits from the other.
Invest in Focused and Quality Stocks
It is quite simple to understand that to have a profitable portfolio one must invest in profitable investments. But many forget this while actually picking their investments. You would not want to dilute your portfolio with low performing investments. Choose quality over quantity.
Monitor Your Portfolio
Once you have a portfolio, the work doesn’t end. You need to monitor it, not daily but yes at a frequency that suits you. This is important because with time various factors change and that might affect your portfolio, you need to assess if your portfolio is still working towards the goals you had in mind. If not then you need to reallocate your investments.
Investing is not hard if you have the right knowledge and the right help. And we are here to help you with both. With Sqrrl you get personalised risk profiling and investment suggestions, making the whole process much easier.
