Financial management is the key to financial independence, which can be achieved with proper money habits. One such habit can be opting for the right investment avenues at the right time to fulfil your short-term and long-term goals.

To be a smart investor, you need to have a balanced portfolio to mitigate risks arising from market volatility and to earn attractive returns to aid wealth creation. A successful investment considers your risk tolerance, your investment goals and horizon. Before delving deep into how you can build and efficiently manage your portfolio, it is important to know what exactly is a portfolio.

What is a portfolio?

• A portfolio is a collection of stocks, commodities, bonds, private investments, real estate, Exchange Traded Funds (ETFs), cash and cash equivalents, etc.
• This collection of financial investments can be either actively or passively managed depending on the type of asset class.

Ways to manage a balanced portfolio

Being cautious and conservative is the key to success. An investor should be optimistic when investing, but only as long as they perform a thorough cost-benefit analysis and their investments generate fair results.

The following are some efficient and effective ways to build and manage a robust portfolio:

• You must invest your capital in instruments within your knowledge base. It is crucial to have a fair idea of the asset class you are willing to invest in. Equally important is deciding on asset allocation – how much percentage of your portfolio should you allocate to a particular asset?
• In case of investment in stocks, it is recommended to purchase them after your analysis of an estimate of its intrinsic value.
• For the long term, it is recommended to keep an eye on the overall operating performance of the asset and not just the current asset price. If an asset constantly provides decent returns despite inflation, you could make a substantial investment. This is how a healthy return on your portfolio can be maintained.
• It is equally important to diversify your portfolio across different assets to avoid the risk of keeping all the eggs in one basket. This diversification helps in mitigating risks and adjusting returns. If one subset of an asset class underperforms, you could have another security in your portfolio that might give you better returns, thus balancing your returns and losses.
• Rebalancing your portfolio is important to ensure your investments are working for you. If your investment in a particular security or a sector is not getting the desired yield or is underperforming, you could swap your investments to high-performing asset classes or sectors. Rebalancing periodically also helps in keeping your portfolio aligned to your investor profile.

There is no one-size-fits-all solution when it comes to building and managing a portfolio as every investor has different goals, investment horizons, and risk appetite. While the above points could help you with the basics, it is always prudent to reach out to an expert who can provide personalised financial plans that are unique to your investor profile.

Reach out to one today and get started on your investment journey.