The term investment portfolio can be defined as collection of different investments held by an individual, organization or financial institution. Each investor wants to maximize his wealth by investing funds in multiple investment options. So the diverse investment portfolio makes it easier for the individual investors to manage his assets in a systematic and organized way. Further, a balanced investment portfolio can also be effective in meeting your short-term financial objectives along with accumulation funds for your future. As you take investment decisions by keeping in mind certain objectives, the right investment portfolio will enable you to monitor your investments, and change the investment strategy to accomplish your financial goals. If you are new to building investment portfolio, it is advisable to spend some time in understanding some of its key elements.
Identify Individual Investment Options:
The size, structure and constituents of an investment portfolio vary from one investor to another. Each investor wants to get higher returns, while keeping his principal amount of funds intact. Some people prefer investing funds in term deposits and debentures to take minimum amount of risks, whereas the people willing to take risks choose investment options like stocks, bonds, equities and mutual funds.
So each item of a single investment portfolio can have a distinct risk/reward ratio. Also, an investor can decide about investing funds in a single item or diversify his investment options. Normally, a balanced investment portfolio consists of both high risk-high yield investments and low risk-low yield investments. However, the investment portfolio can include both long-term and short-term investments made by an individual or institution.
Understand How to Use the Investment Portfolio:
Once you prepare an investment portfolio, it can be used to evaluate and monitor your financial position. You can further track, analyze and monitor your assets at different points of time. Also, you can divert funds from one investment mechanism to another to increase the value of your assets without taking high risks. If you are interested in knowing your current financial picture, the investment portfolio can help you in achieving your objectives. Also, you can make the necessary changes to accumulate funds for your retirement. As all your financial data are gathered in one place, you can take quick and wise decisions to get higher returns.
Concentrate on Important Features:
Normally, your investment portfolio will include your assets and investments. Normally, the items categorized as assets will have low risk quotients, whereas a higher level of risk will be involved with investments. Your savings account, checking account, term deposits and insurance policies will be included in the assets section of the investment portfolio. Similarly, items like land, building and jewelry will also be considered as assets.
On the other hand, the investment section of the portfolio will include the amount of money invested in stocks, bonds, equities, mutual funds and real estate. The value of the investment items will often vary based on the market conditions. So you have to send some time in deciding about investing funds in these high risk-high return financial mechanisms.
Diversify Your Investments:
When you prepare the investment portfolio, it is important to keep in mind your long-term and short-term financial objectives. In the short-run, you may want to get regular returns on your investment, whereas in the long-run you will like to save more funds for your retirement and future. You also have to diversify your investment options to get high returns. An increase is also noted in the number of people investing in socially responsible mutual funds and microfinance institutions in India to optimize the impact investing
These financial options allow you to simultaneously get returns on your investment and offer financial support to the social cause you are passionate about. An ideal investment portfolio should include both high risk-high yield and low risk-low yield investments. Buy you must invest a large part of the total funds in high risk-high yield investment options to protect the principal amount. At the same time, a small part of the total funds need to be invested in the high risk-high yield investment options to maximize your wealth creation.