Rashmi Wankhede believes while wealth accumulation depends on taking the right investment decisions at the right moment, it also equally depends on managing portfolio smartly. She finds out how an investor should effectively manage portfolios to make more of the investments made.
Peter Lynch- American investor, mutual fund manager, and philanthropist, once said: “Know what you own, and know why you own it.” Portfolio management rests on the same theme that one must know which fruits investors have in their baskets and their appetite for them. Portfolio management is a long distance run and there are no short cuts to it. James Morton rightly said: “Most people who make lot of money in the markets over the long term do not trade frequently.” Investors should follow the same line of action while building up their portfolios and should focus on investing rather than trading.
History suggests that one should start early in working life to build up one's portfolio as there are less financial obligations at that time. It can fetch them huge returns over a period of time by getting advantage of the time value of money. The first thing to build up a portfolio is to determine your investment profile. This exercise is useful to evaluate your financial needs, time frame, tolerance to risk and objective behind building up the portfolio. It will help you understand the type of investment you are looking for and, accordingly, decide on the investment strategy for the same. Knowing one's needs and goals, one can allocate funds for different assets, including cash, stocks, bonds, commodities, etc while creating the portfolio. Asset allocation depends on one’s income, so the larger the income, more asset classes and risks can be taken by investors.
Investors should also check their tolerance to risk. If one remains calm in volatile markets and holds on to the position, then he has high tolerance to risk. If one gets anxious on such fluctuations, then he has low tolerance to risk. If one can’t bear such fluctuation and gets hyper on every dip, then such investor should avoid investing in stocks and play safe by holding cash and debt assets only.
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