February 6, 2023

 What is Portfolio? Learn how to build your own portfolio

If you are interested in the stock market, mutual funds, investment, then you must have heard this word portfolio from people somewhere. What are we doing in this post? (What is portfolio), Types of Portfolio, how important it is to create a portfolio. So that you too can make your balanced profitable portfolio.

There has been an increase in the awareness of investing so much these days, not before. Everyone wants to invest for their good future. Today, people have more investment options available than before, such as many stock markets, mutual funds, bonds, cryptocurrencies, gold, real estate etc.

But it is very important to have good returns on investment as well as low risk. That is why it is very important for us to make a portfolio with the right policy.

So friends, to move ahead in this post, first of all know what is portfolio?

What is Portfolio ? 

Portfolio It is a compilation of all financial investments in stocks, bonds, commodities, exchange-ended funds (ETF’s), close-ended funds and cash. Generally people understand that stocks, bonds and cash make up their portfolio, but it is not the case that any type of property, real estate, art and personal property can also be included in the portfolio.

What Is Portfolio diversification ?

Portfolio diversification means to invest the total capital by dividing it in the right amount in different finance options while not investing in one finance option. So that the risk and volatility can be reduced.

Types of Portfolio

A smart investor always diversify his investments. Due to which he can get good returns by taking less risk on his investment. This is how the portfolio is divided into the following five main types keeping in mind the risk and returns, and future goals.

1]  Aggressive Portfolio:

These types of portfolios are more focused on returns and due to which they are also more risky. Meaning that most of the investments in this portfolio are in the shares of recently started startups and small companies, technology companies or other sector companies, which can give more returns in a very short time. But it can also be very risky. Risk management is a very important aspect in this type of portfolio. In which work has to be done on good returns in less loss.

2] Defensive Portfolio 

This type of portfolio consists of defensive stocks. Defensive stocks are those whose price is not very sensitive i.e. market movement does not have much effect on them. That is, there is a possibility of giving good returns on them both in bad and good times. In this, there is a company to make more everyday things. Generally, no matter how bad the economy is, but the business of the company making everyday things continues to run properly. In this, the company also gives dividend to the shareholders in the form of bonus.

3]  Income Portfolio 

The investment of this type of portfolio is mostly focused on the income coming from dividend. In this, more and more dividend is invested in the shares of the company. Some of these stocks may even fit in a defensive portfolio, but they are mainly chosen for good returns. Many investors also take real estate properties for diversification of income portfolio, which later on can give steady income in the form of rentals.

4] Speculative Portfolio:

Speculative in Hindi means gambling. Investing in a speculative portfolio is very close to gambling. This type of portfolio is considered to be more risky than any other type of portfolio. Because taking a lot of risk in it, a lot of profit is expected in a very short time. It takes a lot of research to get good returns from this type of portfolio. Most of the time, trading is done instead of investing in speculative stock. IPO is also an example of speculative. The financial advisor believes that in this type of fund should not be invested more than 10%from his total assets.

5] Hybrid Portfolio:

To create a hybrid portfolio, along with stocks, investments are made in bonds, real estate, commodities, such as this. Generally, investments in this portfolio are made only in blue chip stocks, well rated government bonds or corporate bonds. In a hybrid portfolio, equity investments are made in stocks and bonds, due to which the right balance of risk and return is struck.

How to make your good portfolio?

We have already seen that your portfolio can be profitable only if you diversify it well and manage it properly. So let’s see how to diversify the portfolio?

Spread your investment well:
Investing in equity is a good thing but it is not that you should invest all your investments in the stock of a single company, or in any one sector only. Apart from this, you also have other options like Mutual Fund, Gold, Fixed Deposit etc.

Suppose if you have invested in only 5-6 stocks and also belong to IT sector. If the market is not doing well or the government changes some policy for the IT sector, then it can result in all the company’s stocks in that sector.

If you are going to invest in share market equity as well, then it is good that you invest in different companies as well as in different sectors. For which you have options available anywhere in the market such as Information Technology IT, Pharmaceutical, Energy, Manufacturing, Banking and Finance, Consumer Goods etc.

2] Explore other investment options:

You can explore other options for investment along with equity, such as mutual funds, gold, cryptocurrencies, real estate, pension plans etc.

3] Know when to exit from investment:

This thing becomes very important when any of our investments are not performing properly for a long time. And if there has been some bad change in its fundamentals, then it is better to exit that investment keeping the risk compassionate.

Importance of Portfolio Management:

The main resolution of portfolio management is that diversification, this simply means that all eggs should not be kept in one basket. In diversification, we try to reduce the risk, for which we distribute investments in various financial instruments, industries, sectors.

An attempt is made to track all the financial instruments in the portfolio in one place. Due to which it helps in reducing the risk. Also, emphasis can be placed on increasing the returns of the portfolio.

Given below are some points due to which the importance of portfolio management increases….

1] Allocation of Funds for Higher Returns
2] Reducing Risk
3] Diversification
4] Tax Planning

Conclusion : (What is Portfolio) 

This is how we saw in this post what is the portfolio? (Portfolio in English) and its types, as well as understanding or understanding how important it is to build and manage your portfolio. If you have any question regarding this post, then definitely ask in the comment box, as well as share this post with your friends.

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