Having a good income does not mean financial security. Financial security comes when you invest money in the right financial instruments and meet your financial goals. A right investment portfolio will help you achieve your goals and choose the right investment option. With a little time and dedication, you can achieve your financial goals faster. If you are just starting to invest, then through this article we are going to give you information about building an investment portfolio, which will be very beneficial for you.
make a budget
To save money regularly, it is important to budget your income and make an investment strategy. First of all track your expenses and try to control your expenses. Make a list of expenses and allocate a budget for each of your expenses at the beginning of the month. Apart from this, make a budget for your additional expenses and investments. In this way you can divide your income and allocate money for investment more efficiently. With this, you can make changes in the budget according to your needs.
Savings and investment
Almost all of us save money, but very few of us invest. Always remember that saving and investing are two different things. Saving money means keeping an extra part of your income in a bank savings account, while investing is the savings through which you can make capital, increase your money. Savings are money used in an emergency, which is kept in a bank account. But investment allows you to increase your money over time and get returns. There are two types of investment. First, risk-free investment and second, risky investment. Investments typically return either through interest or through dividend payments.
Check your exposure
Before investing your money, evaluate your risk potential. While evaluating your risk potential, you should take various factors such as age, income, number of dependents, financial stability and family responsibilities etc. Before choosing risky investment options, keep some money in safe investment options like bank savings account, FD, post office FD etc. When you have a lot of back-up, you can consider risky investment options like mutual funds or equities. Also it is better if you do not choose risky investment option at an older age.
Understand the relationship between risk and return
Investors should have a clear view of their risk capacities, as the returns of different options depend on the risk potential. Risk and returns are proportional to each other. Investment options such as ELSS are known to provide better returns than investment options such as PPF due to the risk factor. Simply put, equity-linked investment options have the potential to provide higher returns than debt instruments if they are handled accurately and accurately. However debt options provide moderate returns and also ensure the security of your capital.
Create contingency fund
Before making any type of investment, it is necessary to create a contingency fund. If you do not have an emergency fund, you may face problems in the future and you may come out of your investment when you need money, this may also affect your financial goals. Create an emergency fund equal to at least 6 months of expenses. It can help maintain financial stability even in difficult circumstances. It can help meet your expenses during emergencies like sickness or job loss. Also the emergency fund helps in staying stress free.
Set financial goals
To formulate an investment strategy, you need to categorize your financial goals into short term, medium term and long term goals. With this you can choose the right investment option according to your financial goals. If you categorize your goals, you will get a clear view and you can stay focused. For example, if you want to save for an international trip, then you should estimate how much money you will need for this and choose the best investment option according to your requirement and invest in it.
Diversify your investment
You must invest your money in different asset classes to balance between risk and return. Diversification of the portfolio is important to protect investment against stock market fluctuations. It also reduces the chances of risk.
Review your investment portfolio at least once a year. This makes it easier to understand how far you have received. You are not harmed This will allow you to make changes in investment plans and choose new options based on the performance and goals of the investment instruments.