An article by Sherin Dev
This article intended to provide knowledge to people on Fundamentals of Investing. As it would majorly discuss the most essential principles for retirement investing, the common must have’s would be identified and shared. Started with how to build an investment portfolio, this would discuss further on asset allocation principles, diversification, re-balancing and the advantages of regular saving practices. If you are in any stage, this would help to understand and build your own investment portfolio considering factors like financial situation, risk taking capacity and investment horizon.
Build your investment portfolio – The Essentials
The first step to your investing is to build and investment portfolio that suits to your situations. One of the most remembering idea when creating an investment portfolio is, never put all your eggs to a basked. Instead, the investment should diversified in a better way by allocating your money to various assets. When allocating money to a range of investment products, it would help you to manage risk in a highly efficient way.
Asset allocation principles
Typically the asset allocation can be done by diversifying assets to various investment instruments. Stocks, Bonds and Cash are the three major investment types. These instruments also known as Equities, Fixed Income and Short term investments.When investing in stocks, your capital should spread across each of these three investment types. When it comes to the stock investment type, your investment should happen with various companies, across large cap, mid-cap and small cap companies spanned across various industries and sectors. To hedge better, investors can even prefer to invest different countries by understanding the sectors leading those countries. For an example, US market is best for internet companies and technologies, Singapore is best for real estate and shipping, UK is good for metals, India, China and Brazil can be preferred locations in Emerging markets.Investment in mutual funds are another simple and best example for investing in both stock and bond types with a single investment action.Cash investment cane be fixed deposits, liquid funds and other highly liquid instruments that allow you to get your money back in no time.
Important factors to consider when Building your Investment Mix or portfolio:
There are three major factors should consider when build your portfolio. It would be your financial situations, Risk taking capacity and Investment horizon. A young person can be invested in stocks more aggressively than a person near to retire. A well mix of stock and guaranteed investments would be a best mix for people those are middle aged. This can be achieved by re-balancing the portfolio time to time that we are discussing next.
Re-balancing and Regular Savings
Once you have created your investment portfolio, it is the time to think more about focusing on that investment mix. This included monitoring and re-balancing the portfolio to help performance and avoid possible problems and regular investing. Re-balancing means to monitor your investment portfolio and re-balancing it over time depends on the factors changing in your life time to time.Regular investing means a disciplined approach o save money efficiently for longer time and regularly. Identifying the schedule to save money is the first step involved in it. This schedule can be weekly, monthly, quarterly or any other schedule possible by you. Next is to identify the amount you want to save each time. Once both done, automate it with direct deposit or fund transfer. This would help you to build wealth over time by regularly saving small amount for long time.Asset allocation, diversification, re-balancing and regular savings are the steps discussed above where you should focused and get maximum knowledge. Having better knowledge in these areas would help you to be yourself as your investment manager and manage your investment and money in a structured way. Bet wishes to all.
Sherin Dev, a financial writer, investor and the founder Investinternals.com and moneywithmoney.net financial blogs. Follow him on Twitter or in Facebook. Any queries on articles, guest posts, contact at email@example.com