Looking to become a successful investor? If yes, then you need to make efforts to maintain a good portfolio. As an investor, you need to understand your financial goals, your future requirements and risk-taking ability in order to determine your asset allocation. Building a good portfolio with the right mix of different asset classes will help you in generating wealth and living a peaceful life after retirement. This article will assist you in building a complete financial portfolio.
Let us learn about the steps for building a financial portfolio.
Steps For Building Financial Portfolio
- Make A List
Before you begin making a financial investment portfolio, you must prepare a list of everything you own. The list must include all your assets like stocks, immovable property, cash and bank balance, bonds, etc. Also, prepare a list of liabilities. This balance sheet is going to play a critical role in shaping your financial portfolio. This list will act as a benchmark for your financial portfolio management.
- Know Your Appropriate Asset Allocation
After knowing all your assets and liabilities, determine your financial goals and shape your financial portfolio. You must consider your age during financial portfolio management because only then you would know what would be your upcoming needs and how much capital you can invest.
Another factor that you must consider before determining your asset allocation is the amount of risk you can take. If you are clear with your future financial requirements you would be able to easily figure out your risk tolerance. It is a well-known fact that higher returns can be made only by taking higher risks. In such a scenario, the general rule is that if you are young, you can take bit of a risk. But if you are nearing your retirement, it is recommended to build a safe and secure financial portfolio.
To put it another way, there are two types of investors; conservative and aggressive investors. Conservative investors are those who would make a less risky portfolio by investing a major portion of capital in fixed income securities and small portion towards equities. Aggressive investors are just opposite of conservative investors. They are willing to take more risk in anticipation of good returns by investing a significant portion of capital in equities and remaining in fixed income securities.
- Build the Portfolio
After determining the right asset allocation, build the financial portfolio. Here you can break different asset classes into subclasses. Like, if you are investing in equities, you can divide your investment in the equities into various sectors like pharma, banking, etc. The duration of the investment in bonds can be divided into short term and long term. Thus there are many ways through which you can select the asset and securities. While investing in each asset class consider the below-mentioned points:
1. Stock Picking: If you are investing in stocks, determine the level of risk you are willing to take. In addition, know the sector well before investing. Understand the market cap of a company, the future of a particular sector, the opportunities and risks in the future. You must make sure to regularly monitor the investment in equities by following the stock price, company and industry news.
2. Bond Picking: Before investing in bonds, consider the time period, maturity, credit rating, bond type and interest rate. Invest only after understanding the above factors in detail.
3. Mutual Funds: Mutual funds allow you to hold stocks and bonds that are managed by professional fund managers. Before investing in mutual funds, find the track record of the fund managers and fee charged by them. Low-cost index funds are another good option to invest for risk-averse investors as they replicate the performance of an index.
4. Exchange-Traded Funds: Exchange-Traded Funds are a good alternative to mutual funds. They are just like mutual funds and represent a group of stocks. However, they are not actively managed like mutual funds. Because of passive management, these funds are less costly than the mutual funds and also offer good diversification.
- Keep Assessing Portfolio Weightage
After preparing a financial investment portfolio, its value would keep on changing due to price fluctuations. Therefore, it becomes important to continuously rebalance the portfolio as per the price movement. Also, the market situation keeps on changing so you also need to alter the balance of your portfolio accordingly. While rebalancing the portfolio, analyse your future needs and risk appetite. Like, if you are ready to take more risk you can increase your stake in equities. Therefore, rebalancing is all about determining which asset class in your financial portfolio is overweight and underweight.
- Strategy to Rebalance
After determining which securities to reduce or increase from your financial portfolio, you can again follow the process given above under “Build Your Portfolio” heading. By using the same investment approach, you can pick the securities you want to invest. If you feel that some securities in your portfolio which are overweight can fall, you can consider selling them and purchasing another set of securities. In the whole process, you must not forget the tax implication of your decisions.
The above mentioned steps shall help you in building a complete financial portfolio. During the whole process, you must always remember that diversification is the key to building a safe and secure portfolio. If you are a beginner or need any assistance in building a financial portfolio, you can contact IndiaNivesh Ltd. We are one of the most trusted and value-enhancing financial services group in India.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Mutual funds are the most popular investment avenue among investors. It can be justified from the fact that the mutual fund industry has added a whopping 3 trillion to their asset base in 2018 and the uptrend may continue in the coming years. There are many types of mutual funds available in the market and one of them is Index Funds. They offer an easy, diversified and low-cost way to invest in the stock market. In this article, you will learn about the Index Funds in detail. Let us begin the article by learning what is an index fund? What is an Index Fund? Investors always seek to take advantage of diversifying their portfolio across different asset classes. To do so, index funds are the most popular because they imitate the portfolio of an index like the Sensex or the Nifty. This fund is constructed in such a way that it matches the performance of the financial market index. An investor who has bought an index fund would experience the price moment exactly in sync of the quoted value of the Sensex or Nifty, depending on the fund. Therefore, these funds ensure the performance exactly as the index that is being tracked. One of the main benefits of these funds is its low expense ratio. Let us now learn how does an index fund work? How Does an Index Fund Works? Like mentioned earlier, Index funds basically track the performance of the index such as Nifty. When you purchase this fund, your portfolio will have 50 stocks in the same proportion that comprise in the Nifty. Therefore, an index represents a group of securities of a market segment. In India, the most popular Indices are NSE Nifty and BSE Sensex. The index funds are not actively managed funds because they replicate an index. In actively managed funds, the fund managers keep on looking for opportunities by researching and selecting new stocks. But in index funds, the managers just maintain the composition of an underlying benchmark. In the case of actively managed funds, the aim is to beat its benchmark while in the case of index funds, the managers try to match the performance of the portfolio with that of the index. Even though the fund managers try their best to match the performance of index fund returns with their portfolio but still there can be some small difference. The index fund managers try to bring down the tracking errors so as to match the index fund returns with the portfolio returns. Now coming to the most important question that who must invest in the low cost index funds. In this section, we will discuss the same. Who Can Invest in Low Cost Index Funds? If you want a predictable set of returns and do not want to take much risk, these low cost index funds are ideal for you. These funds will give you same set of returns as a particular index would. Also, if you want to keep yourself associated with equity funds but not with those funds that are actively managed and bear some risk, these funds are good for you to invest. Therefore, the first thing to consider while investing in the low cost index funds is determining your financial goals and the amount of risk you are willing to take. In the long run, the performance of the index funds is very good. Let us now learn how you can invest in the index funds? How to Invest in Index Funds Investing in Index Funds is very easy with IndiaNivesh Ltd. Just follow the below mentioned steps to invest in the index funds; Visit the website - https://www.indianivesh.in/ and sign in. Fill the amount and period of your investment. Complete the hassle-free KYC process. You can now invest in your preferred index fund amongst the many options available. Before you invest in index funds, there are a few things that you must consider. Let us see what they are. Things to Consider Before Investing in Index Funds Risk Appetite It is always advisable to mix and diversify your investments. Index funds are perfect for those who want to take fewer risks. You can reap higher benefits in these funds when the market is in bull mode. When the market enters the bearish mode, you may consider entering actively managed funds. Returns Index funds aim to replicate the performance of the underlying benchmark. If you are looking for decent returns in the long run, you can invest in the index funds. It is advisable to invest in those index funds that have minimum tracking error. Cost Of Investment The main benefit of investing in index funds is the lower expense ratio. The expense ratio of index funds is 0.5% or less while the expense ratio of actively managed funds is 1% to 2.5%. The funds with lower expense ratios always generate higher returns. Financial Objectives If you are looking to invest for your retirement or want to create long term wealth then index funds are ideal for you. These funds can generate good returns in the long run which would be of great assistance in your life after retirement. Period of Investment Index funds are known to give better returns over a long term of period. You must have the patience to stick to these funds and avoid taking any decision on the basis of short term fluctuations. Taxation On redemption of the index funds, the capital gains are taxable. Your holding period determines the rate of taxation. If the holding period is less than a year, the short term capital gains are taxable at 15%. And if the holding period is more than one year, the long term capital gains over Rs. 1 lakh is taxable at 10% with no benefit of indexation. The above mentioned are the things that you must consider before investing in the best index funds available in the market. If you looking to invest in best index funds and need any assistance you can contact IndiaNivesh Ltd.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Often when people begin their investment journey in the stock market, they are swamped with multiple questions in their mind. The very first basic question that comes to the mind is how to determine which stock to purchase and which to avoid. Well, the answer to this question is - stock charts. The stock charts help you in evaluating and gathering all the important information that you must consider before purchasing a stock. By learning stock pattern analysis you can not only become a successful investor but also a successful trader. In this article, you will be learning the different aspects of stock chart reading. Let us first understand what are stock charts? What are Stock Charts? Stock chart is a sequence of prices plotted on a graph over a different timeframe. The y-axis i.e. the vertical axis of the chart represents the price and the x-axis i.e. horizontal axis of the chart represents the time period. Learning and understanding stock chart reading may look like a tough task initially but with little practice, you can master the art. All you need is the correct understanding of the basics of chart reading. They can help you predict the future price movement correctly. Let us now understand the various aspects of stock charts. What are the aspects of Stock Charts? Price and Volume The charts are generally divided into two parts; the price of the stock and the volume of the stock. For correct stock chart analysis and reading of stock chart patterns, it is important to read both price and volume together. This is because if you look only at the movement of the price you would not know how genuine the buying or selling is. For example, a stock has fallen over 5%. Initially, it may look very bad but if the fall is with lower volumes than the average, you may continue to hold the stock because the selling is not done by large retailers who drive the market. The same is the case when the stock is rising but with lower volumes. This rise in the stock price could be fake because when the big players enter the stock there would be a huge rise in the volumes. Moving Average Lines Moving average lines are very important to understand the performance of a stock. They represent the movement of the share price over a period of time. With the help of moving average lines, you can understand whether the stock is overbought or oversold by large retail participants. The mutual funds and big institutions follow the stock chart patterns and change their positions in stocks when the price rises or moves below the moving average point on the graph. The key moving average points can be a 50-day line, 15-week line, etc. When the stock falls below the benchmark moving average line, the big players often sell their holding and exit the stock. Similarly, when the price moves above the benchmark moving average line, the big players enter and the stock price can rise sharply. Relative Strength Line Relative strength line helps to identify if the stock is a market leader or laggard. This is done by comparing the performance of a stock with the index i.e. Nifty or Sensex. A sharp line rising upwards on the graph indicates that the stock is outperforming the market while a sharp line downwards is an indication that the stock is a laggard and underperforming the overall market. The stock comes in the leadership territory when the Relative Strength line is rising for a breakout and set for a new high in the market. After learning about the various aspects of stock charts, let us learn about some of the basic stock chart patterns. Stock Chart Patterns Daily Stock Chart A daily stock chart on a graph represents the movement of the stock price on a specific day of trading. The day traders use daily stock chart patterns to take intraday positions. The chart has multiple moving day averages like 50 days, 100 days, etc. which the traders monitor continuously to take positions. When the stock rises sharply it is represented by a sharp line rising upwards and when the stock falls, the graph shows a sharp fall in the line. Weekly Stock Chart Just like a daily stock chart represents the stock price movement on a single day, similarly, the weekly stock chart represents the price summary of stock for a single week. This chart is generally used to forecast the price of stocks for the long-term. The weekly charts can display longer-term data on the screen which makes it easy for the analysts and investors to determine the long term trend of a stock. The new investors often get confused between the weekly and daily charts. The confusion is mainly regarding which charts are suitable for them. This section of the article will try to resolve that dilemma. Daily Vs. Weekly Charts The daily charts are said to be good for the traders who are looking for volume and price action on an intraday basis. The stocks on daily charts are said to be giving a breakout when it breaches the 50-day line on either side. On the other hand, for long term investors, weekly charts are ideal. These charts forecast the long term price of a stock along with its trend. It also keeps the investor's emotions under control as they can take wrong decisions looking at the volatile daily chart movements. The Bottom Line There is no doubt about the importance of stock charts in the share market. You can decode the price movement on charts and take advantage of it by making profits. If you want to learn more about stock chart reading and indulge in trading or investing based on it, you can contact IndiaNivesh Ltd. We are one of the most trusted and value-enhancing financial group with new technologies in India. Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."
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