Maximum bang for your buck — having a balanced investment portfolio

In today’s world, having clear financial goals — both short-term and long-term — is very important for stability and progress in life. Good financial habits help to create a portfolio which is profitable and produces the desired income at the right time based on the individual’s preferences, location, age and investment capacity.

By following a systematic asset allocation method, one can balance risk and rewards and ensure that they make profits with the investments they make.

The three main asset categories wherein one can plan their investments are: Equities, Fixed Income and Cash equivalents. We can plan our asset allocation depending on the level of tolerance towards associated risk factors and keeping in mind the variability in return on investments.

The factors that help an individual build a profitable investment portfolio are as follows:

1. Investing in the right assets: Assets do not simply mean equities, shares, stocks and commodities or mutual funds. Investing also includes mediums such as buying Real Estate property, lending money and earning interests, taking the right loans for making investments such as buying a home or car or getting one’s children married. In all, investing in different asset categories in a balanced manner helps in avoiding too many risks associated with a single category. The kind of assets we buy depends on our risk appetite for these investments.

2. Investing at the right time: Decisions have to be made at the right age and time for any investment to receive maximum ROI. For instance, a person can invest for next 3 years, 5 years or 10 years based on their age, their spouse’s age as well as what they have planned for their children. The longer the duration they choose for certain kinds of investments, the higher the returns. However, it is all a balance of risks versus rewards.

3. Investing with the correct speed: Aggressive investments help occasionally when the markets are low and within the next one to few years, one can expect a sudden increase or improvements. However, going slow and steady and giving things enough time helps in risk avoidance.

4. Reassessing and rebalancing the chosen investment assets and methods: Market conditions change rapidly and what looks like a lucrative opportunity today may lose its relevance in a few months. Therefore, a good strategy is to frequently take stock of existing assets and rebalance portfolio if desired.

On the whole, a successful investment portfolio is one that yields maximum benefit to the investors at the right time. Thus, it is crucial to plan your investment strategy to have the maximum bang for your buck.