{"id":1867,"date":"2021-10-20T17:50:00","date_gmt":"2021-10-20T17:50:00","guid":{"rendered":"https:\/\/rakshithpai.com\/?p=1867"},"modified":"2023-12-22T13:43:01","modified_gmt":"2023-12-22T13:43:01","slug":"how-to-construct-a-profitable-investment-portfolio","status":"publish","type":"post","link":"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/","title":{"rendered":"How To Construct a Profitable Investment Portfolio?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-662c8fc8566d1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\" style='display:none' id=\"ez-toc-cssicon-toggle-item-662c8fc8566d1\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#What_is_a_Portfolio\" title=\"What is a Portfolio?\">What is a Portfolio?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#Three_3_important_metrics\" title=\"Three (3) important metrics:\">Three (3) important metrics:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#1_What_is_your_risk-return_comfortability\" title=\"1. What is your risk-return comfortability?\">1. What is your risk-return comfortability?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#2_What_extent_of_Risk_assets_can_you_hold\" title=\"2. What extent of Risk assets can you hold?\">2. What extent of Risk assets can you hold?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#3_What_is_your_maturity_period\" title=\"3. What is your maturity period?\">3. What is your maturity period?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#Investing_and_Retirement_Planning_Tips\" title=\"Investing and Retirement Planning Tips:\">Investing and Retirement Planning Tips:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#1_Financial_Advisor\" title=\"1. Financial Advisor: \">1. Financial Advisor: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#2_Individual_Retirement_Accounts\" title=\"2. Individual Retirement Accounts: \">2. Individual Retirement Accounts: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#3_Have_knowledge_of_Inflation_and_Tax_rates\" title=\"3. Have knowledge of Inflation and Tax rates: \">3. Have knowledge of Inflation and Tax rates: <\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#Have_a_retirement_plan\" title=\"Have a retirement plan!\">Have a retirement plan!<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#How_to_have_a_Diversified_Portfolio\" title=\"How to have a Diversified Portfolio?\">How to have a Diversified Portfolio?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#Portfolio_Strategy_One-2-Seven_1-2-7\" title=\"Portfolio Strategy One-2-Seven (1-2-7)\">Portfolio Strategy One-2-Seven (1-2-7)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#1_First_10_%E2%80%93_To_provide_safety_savings\" title=\"1. First 10% &#8211; To provide safety savings.\">1. First 10% &#8211; To provide safety savings.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#2_Next_20_%E2%80%93_To_Trade_with_the_trend\" title=\"2. Next 20% &#8211; To Trade with the trend.\">2. Next 20% &#8211; To Trade with the trend.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#3_Last_70_%E2%80%93_To_Invest_for_Growth_and_return\" title=\"3. Last 70% &#8211; To Invest for Growth and return.\">3. Last 70% &#8211; To Invest for Growth and return.<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#Conclusion\" title=\"Conclusion:\">Conclusion:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/#Also_read\" title=\"Also read:\">Also read:<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Portfolio\"><\/span><b>What is a Portfolio?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>A portfolio is a collection of financial instruments<\/strong> such as stocks, ETF\u2019s, Mutual Funds, and other assets that are strategically put together to beat the overall market average return and to have a rate of return (ROI) that\u2019s comfortably over the average inflation rate.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">A portfolio may include a wide range of assets that are or should be inversely correlated to one another in terms of past performance and future estimations. This way, an investor can make a profit tough a part segment of his\/her investment is running on loss.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Hence,<strong> it is suggested to have a well-diversified portfolio.<\/strong> In terms of diversification, <strong>Inter-head diversification is as important as asset-based diversification.&nbsp;<\/strong><\/span><\/p>\n\n\n\n<p><b>Example:<\/b><span style=\"font-weight: 400;\"> We have Equity being an asset class. Diversifying amongst various stocks (industry-based diversifying such as HDFC Life for Insurance, HUL for <a href=\"https:\/\/rakshithpai.com\/best-fmcg-stocks-to-buy\/\">FMCG<\/a>, Kotak-Mahindra for NBFC, etc.) is as important as asset-based diversification wherein, we invest in stocks, ETF\u2019s, Mutual Funds, Gold &amp; Silver, and Real Estate Investments.<\/span><\/p>\n\n\n\n<div class=\"wp-block-buttons is-horizontal is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-1 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background wp-element-button\" href=\"https:\/\/upstox.com\/open-account\/?f=FN1853\" style=\"border-radius:50px;color:#0f0027;background-color:#e4fa00\" rel=\"nofollow\"><strong>Open Upstox Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Three_3_important_metrics\"><\/span><b>Three (3) important metrics:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Before constructing a portfolio, answer these three important question;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_What_is_your_risk-return_comfortability\"><\/span><b>1. What is your risk-return comfortability?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">To what extent are you ready to take risks? And, are you sure that you are not investing heavily into risky assets, for when the music stops you\u2019ll be holding a full bag of dump weighing on you! (To know more about various asset classes and their risk profile. <\/span><a href=\"https:\/\/rakshithpai.com\/best-investment-plans-india-middle-class\/\"><b><span style=\"text-decoration: underline;\">Click Here!<\/span><\/b><\/a><span style=\"font-weight: 400;\">) Check the table.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_What_extent_of_Risk_assets_can_you_hold\"><\/span><b>2. What extent of Risk assets can you hold?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">There is no dispute when we say \u201cEquity is the best asset class to invest\u201d. But, with better return comes higher risk. There\u2019s one way the risk an individual investor can or should take can be estimated. I.e based on his\/her age. <strong>The trick is to know one\u2019s age and that\u2019ll be the extent of non-equity investments one should hold. The rest to be invested in Equities.<\/strong><\/span><\/p>\n\n\n\n<p><b>Example:<\/b><span style=\"font-weight: 400;\"> Suppose you are 25 years old. Now, 25% of your entire portfolio should be in assets such as Gold &amp; Silver, Bonds, Money market Instruments, FD\u2019s, RD\u2019s and other non-equity based investments. Wherein, your rest 75% of the portfolio should be invested in Equities directly or indirectly (Indirectly being investing via Mutual funds, ETF\u2019s, Index funds, etc). This way an <strong>individual over his\/her 60\u2019s should invest over 60% of their portfolio into non-equity based assets.<\/strong><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_What_is_your_maturity_period\"><\/span><b>3. What is your maturity period?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">Here, we answer the most important question. Why are you investing? Each of us has a goal that is to be achieved. And thus, we chose various assets to help us reach this goal. Thus, one should know what asset he\/she is investing in and to what extent they are in it.<\/span><\/p>\n\n\n\n<p><b>Example: <\/b><span style=\"font-weight: 400;\">To be a successful investor is to hold equities in well-established companies for a minimum of 15-20 years. if you are someone who does not wish to invest in any asset for 15-20 years and wants regular steady income. Then, bonds are your immediate option.<\/span><b><\/b><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investing_and_Retirement_Planning_Tips\"><\/span><b>Investing and Retirement Planning Tips:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Financial_Advisor\"><\/span><b>1. Financial Advisor: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">We should always take professional help when it comes to such topics where we are not well informed. The same principle applies here. Invest only after consulting your professional financial advisor. Or, at least invest in such assets that are managed by professional investors. <strong>Assets such as Mutual Fund Investing, Index &amp; <a href=\"https:\/\/rakshithpai.com\/what-is-exchange-traded-fund-investing-benefits-and-features\/\">ETF Investing<\/a> for a continuous period (non-stop SIP) of 15-20 years qualifies.<\/strong><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Individual_Retirement_Accounts\"><\/span><b>2. Individual Retirement Accounts: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">Make use of your retirement benefit accounts provided either by your employer or the government. Retirements accounts such as,<\/span><\/p>\n\n\n\n<ul>\n<li><span style=\"font-weight: 400;\">Employees Provident Fund (EPF)<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Senior Citizens&#8217; Saving Scheme (SCSS)&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Post Office Monthly Income Scheme (POMIS)<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Government of India Savings (Taxable) Bonds<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Fixed Deposits and such other savings.<\/span><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Have_knowledge_of_Inflation_and_Tax_rates\"><\/span><b>3. Have knowledge of Inflation and Tax rates: <\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">We all know or have a minimum idea about what our tax slab rates are (For more information, contact your Chartered accountant). But, how many of us know what the inflation rates are and how it affects our wealth over time? (To know more about the importance of Equity investing and how the same beats Inflation rates over time. <\/span><span style=\"text-decoration: underline;\"><a href=\"https:\/\/rakshithpai.com\/how-to-invest-in-stock-market-a-beginners-guide-to-investing\/\"><b>Click here!<\/b><\/a><\/span><b>)<\/b><b><\/b><\/p>\n\n\n\n<p>Yes, Inflation, over time, eats away your dreams. They are the worst form of tax. A tax that&#8217;s not known to many. One that doesn&#8217;t do any partiality in regards to whom it affects. You are poor, rich, influential, or not. It doesn&#8217;t matter for inflation tax is known to affect each and every one of us. <strong>Start your retirement plan considering &#8216;inflation tax&#8217; in mind!<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Have_a_retirement_plan\"><\/span><b>Have a retirement plan!<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Indian retirement age as per the government data (on average) is at 60 years. So, basically, an individual has to work until he\/she is 60 years of age to take retirement (year changes based on the amendments and area of work). Now, Indians Life expectancy is at 69 years. <strong>Does it mean that we should toil our entire life just to have a mere 9 years of retirement?&nbsp;<\/strong><\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Also, note that the life expectancy is increasing thanks to modern medicine and the health care system. But, with increased life expectancy comes additional years to service your retirement funds!<\/span><\/p>\n\n\n\n<p><b>Example:<\/b><span style=\"font-weight: 400;\"> Suppose Mr.X has worked for the past 35 years and has built sufficient corpus to meet his retirement expenses. This 60-year-old individual has 12 lakh in savings and earns a 7% return each year (not considering tax implications and other aspects). This 84,000 Rs (12 lakh * 7%) is sufficient to meet Mr.X\u2019s entire year expenses based on the current standard of living.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>Over time, Thanks to inflation, our cost of living increases thus a compulsory diminution in the standard of living.<\/strong> Here, Mr.X\u2019s current income is sufficient to meet his standard of living. But, as inflation increases (for it surely will). His income of Rs.84,000 will not be sufficient. Hence, instead of working till 60 and taking retirement till the end of his time. He has to work till 65, 70, and over to maintain his current living standard to meet his basic needs.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>All your retirement planning goes in vain if you are not considering the increased cost of living due to inflation.<\/strong> The increased cost of housing, increasing medical cost, and increasing cost of consumption (such as grains, veggies, fruits, etc) has to be kept in mind while planning for retirement.&nbsp;<\/span><\/p>\n\n\n\n<p><strong>The best way to handle this situation is to start investing early. Be consistent and diversify!<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-horizontal is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-2 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background wp-element-button\" href=\"https:\/\/upstox.com\/open-account\/?f=FN1853\" style=\"border-radius:50px;color:#0f0027;background-color:#e4fa00\" rel=\"nofollow\"><strong>Open Upstox Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_have_a_Diversified_Portfolio\"><\/span><b>How to have a Diversified Portfolio?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">All this is fine. We know we need to plan accordingly and invest wisely to meet our retirement goals. But, how and where to invest? How to strategically allocate our portfolio?<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">To answer these questions. I would recommend you to read this article. Know what are all the asset classes available for Indian Investors. For more information, <\/span><span style=\"text-decoration: underline;\"><a href=\"https:\/\/rakshithpai.com\/best-investment-plans-india-middle-class\/\"><b>click here!<\/b><\/a><\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Portfolio_Strategy_One-2-Seven_1-2-7\"><\/span><b>Portfolio Strategy One-2-Seven (1-2-7)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>The portfolio shall be bifurcated into three parts.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_First_10_%E2%80%93_To_provide_safety_savings\"><\/span><strong>1. <span style=\"text-decoration: underline;\">First 10%<\/span> &#8211; To provide safety savings.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>The first 10% of your portfolio should be invested in Gold &amp; Silver.<\/strong> Here, we should prefer Gold and Silver metal&nbsp;as in actual metals over any other pieces of equipment. This 10% in Gold &amp; Silver not only provides you an opportunity to invest in such <strong>an asset that is intrinsically termed inflation hedge.<\/strong> But, it will also provide a vehicle to park your savings.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">This 10% of your investment is to have a diversified portfolio that is <strong>partly inversely correlated to Equity investment<\/strong>. For more information about Gold Investing, <\/span><span style=\"text-decoration: underline;\"><a href=\"https:\/\/rakshithpai.com\/is-gold-investment-still-worth-the-shine\/\"><b>click here!<\/b><\/a><\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">The trick is to <strong>buy Gold &amp; Silver in smaller quantities<\/strong> as and when there is a drop in price. By doing this over and again and not selling at immediate intervals. An investor can build a sufficient safe investment corpus to meet his\/her future expenses.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Next_20_%E2%80%93_To_Trade_with_the_trend\"><\/span><strong>2. <span style=\"text-decoration: underline;\">Next 20%<\/span> &#8211; To Trade with the trend.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>The next 20% of your portfolio should be invested in Mutual Funds and Index funds<\/strong> (preferably a well know ETF\u2019s). In order to beat the market average in terms of return on investment. We need to invest alongside the market. This is achievable when we invest in such ETF that shadows the Nifty 50, Sensex, and other indices to the extent possible.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Here, the trick is to stay invested. Mutual Funds, Index funds, and\/or ETF investing is meant to be invested, <strong>to stay invested for a prolonged period of time.<\/strong> The minimum period span is 15 years and more.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">So, <strong>the best way to approach this 20% of investment is to do SIP<\/strong>, (Systematic Investment Plan) every month no matter where the market is heading. Keep investing, keep accumulating. Here, <strong>discipline matters more than any other quality you possess as an investor.<\/strong><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Last_70_%E2%80%93_To_Invest_for_Growth_and_return\"><\/span><strong>3. <span style=\"text-decoration: underline;\">Last 70%<\/span> &#8211; To Invest for Growth and return.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>The final 70% of your portfolio should be in Equities<\/strong>. I believe India will be a 10 trillion economy by 2030, this great fleet is achievable, and when it does. Market (SENSEX) could reach 5,00,000 points.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Extremely bullish on India and our growth story and hence, I usually suggest each and every individual to invest in the Indian Stock Market. Obviously, Investing in the Stock market comes at a risk. Hence, this 70% is further segregated and the following points are to be strictly followed.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">i) <strong>Your Investment in Equities should not exceed 70% of the entire portfolio<\/strong>.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">ii) Out of 70%, <strong>one half&nbsp; (35%) (Part A)<\/strong> of the portfolio should be concentrated on those <strong>well-established companies that rule their respective market segment.<\/strong> This way, retail investors are safeguarding their capital by investing in those already successful companies that are stable and have a proper market base as a moat.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">iii) The first half portion (35%) (Part A) of the portfolio as said above should be invested in not more than 7 individual stocks. This way, each stock will get not more than 5% of the concentration in the entire portfolio.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">iv) And, <strong>the rest half (half of 70%) I.e 35% (Part B)<\/strong> of the portfolio in another set of 7 stocks. Here,<strong> the investor is taking chances with his\/her investment strategy.<\/strong> He\/she can and should invest in those companies he\/she feels worthy of investment. Again, since the limit is 7 stocks and the <a href=\"https:\/\/rakshithpai.com\/portfolio-allocation-asset-correlation-importance\/\">portfolio allocation<\/a> is 35%. Each stock would get a maximum of 5% allocation.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">v) The reason for the <strong>5% strict limit is to encourage investors to diversify whilst keeping in mind for over-diversification.<\/strong> With this strategy, an investor will hold to the maximum of 14 individual stocks (70% of the portfolio at 5% each) in his\/her portfolio. One which can be comfortably tracked by any investor (retail &#8211; Individual) with ease.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">vi) While the <strong>10% in Bullion (Gold &amp; Silver)<\/strong> and <strong>20% in Index, ETF and Mutual Funds Investing provide for safety in investing.<\/strong> The Part A of <strong>70% (35% of the portfolio) provides for growth based investing (moderately risky, growth fund)<\/strong> and Part B of <strong>70% (next 35% of the portfolio) provides for value hunting (high risk, high return).<\/strong><\/span><\/p>\n\n\n\n<p>vii) <strong>A balance is a must in every portfolio.<\/strong> This kind of hedge an investor takes can assist his\/her portfolio to not only provide good returns in a positive market (bull run). The same could handle well in a negative market (bear drop) for all the diversification and asset allocation.<\/p>\n\n\n\n<p><strong>The below table explains the above wordings:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"300\" height=\"149\" src=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/127-300x149.png\" alt=\"Portfolio Strategy 1-2-7\" class=\"wp-image-1868\" style=\"width:740px;height:368px\" srcset=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/127-300x149.png 300w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/127-1024x508.png 1024w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/127-768x381.png 768w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/127.png 1235w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><b>Conclusion:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">As much as it is important to invest, it is more important to diversify our portfolio accordingly. A well-diversified portfolio can withstand any and all kinds of uncertain happenings that usually take place in our insane market.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>Diversification is a method to stay sane, to invest sane in this market.<\/strong> Especially at times such as this where P\/E ratio, Earnings and Earnings estimate, Cash flow, EV-EBITDA, and such other financial metrics have no value. <strong>Amateur investors have gone immature.<\/strong><\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Instead of buying value. Today, investors (in reality, they are speculators) are buying volume. They just say, \u201cStocks always go up!\u201d But, it\u2019s the case only for those well-established companies that can sustain and only in the case of long-run.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Remember, it is very important for one to invest in Equities. But, not as important as he\/she buys any and all equities at an unjustifiable price. <strong>As Mr.Buffett says it &#8211; &#8220;Buy low, sell high!&#8221;<\/strong><\/span><\/p>\n\n\n\n<div class=\"wp-block-buttons is-horizontal is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-3 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background wp-element-button\" href=\"https:\/\/upstox.com\/open-account\/?f=FN1853\" style=\"border-radius:50px;color:#0f0027;background-color:#e4fa00\" rel=\"nofollow\"><strong>Open Upstox Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><strong>Disclaimer: <\/strong>All the information on this website is published in good faith and for general information purpose only.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Also_read\"><\/span><strong>Also read:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><a href=\"https:\/\/rakshithpai.com\/stock-investing-beginners-guide\/\" target=\"_blank\" rel=\"noreferrer noopener\">How to Invest in Stock Market? A Beginners guide to Investing.<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/rakshithpai.com\/should-you-invest-in-bitcoin\/\" target=\"_blank\" rel=\"noreferrer noopener\">Should you Invest in Bitcoin?<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/rakshithpai.com\/how-should-i-invest-in-indian-stock-market\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why is Investing in Stock Market a Must?<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/rakshithpai.com\/how-to-read-a-balance-sheet-as-an-investor\/\" target=\"_blank\" rel=\"noreferrer noopener\">How to Read Balance Sheet as an Investor?<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/rakshithpai.com\/does-whatsapp-respect-and-protect-your-privacy\/\" target=\"_blank\" rel=\"noreferrer noopener\">Does WhatsApp Respect and Protect your Privacy?<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>What is a Portfolio? A portfolio is a collection of financial instruments such as stocks, ETF\u2019s, Mutual Funds, and other assets that are strategically put together to beat the overall market average return and to have a rate of return (ROI) that\u2019s comfortably over the average inflation rate. 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