Portfolio investment models

Model 1 – Capital Preservation portfolio

Nature: Capital preservation usually means investing in guaranteed investments that are associated with low annual returns.

Suitable for: Capital preservation portfolio typically advisable to those who have low risk taking capacity or a person who is near to the retirement or after retirement.

Investment Instruments: Government secured bonds, money market instruments such as Fixed Deposits, post office investment, insurance endowment plans, debt mutual funds, gilt funds, liquid funds and FMP’s (Fixed Maturity Plan mutual funds) are the best suited investment instruments with such portfolios.

Advantages: The big advantage of capital preservation portfolio is its guarantee on invested amount.

Disadvantages: Major disadvantage of such portfolios are, the return yield will be low as well as fixed. Capital preservation portfolio will not be able to beat inflation due to its fixed yield nature.

Model 2 – Income portfolio

Nature: Income portfolio generally consists Bank fixed deposits or such guaranteed investments which can yield income to the investor time to time.

Suitable for: It is the best portfolio for people who has retired and no such extra income to survive. It is also good for old aged people.

Investment Instruments: Bank Fixed deposits, Mutual fund Monthly Income Plans, Post Office instruments that providing interest income to depositor time to time. Any instrument that is capable to provide income to the investor time to time with guarantee on invested capital.

Advantages: Advantages of this portfolio are similar to the above mentioned capital preservation portfolio.

Disadvantages: Such portfolio always yields the same amount as income for time to time and there will not be any increase on this income depends upon the economic changes or growth. Also, it prevents the growth of investment capital.

Model 3 – Growth and Income portfolio

Nature: An investment portfolio comprising good proportion of investment that able to provide time to time return to the investor as well as able to grow the capital invested.

Suitable for: Middle aged people as well as who has the moderate risk taking capacity. This is suitable to investors who would like to invest his money but not able to take more risks.

Investment Instruments: Exchange Traded Funds, Fixed Maturity Plan mutual funds, Balanced Mutual Funds, Government Bongs, Blue chip stocks.

Advantages: This portfolio can meet the timely money requirements of an investor as well as take advantages from capital market and economy growth to grow the invested capital.

Disadvantages: Yielded return will be comparatively low with following models. Not able to take full growth advantages from the capital market and economy growth because of the nature of investment instruments in this portfolio.

Model 4 – Long-term Growth portfolio

Nature: Investing on selected instruments that can yield exciting returns in a long run. This is also known as the contrarian investment approach.

Suitable for: Any investors who are in the young age with moderate risk taking capacity.

Investment Instruments: The best suitable investment instruments in such portfolio is, Exchange Traded Funds, Gold and gold focused investment like, physical gold, gold mutual funds, gold ETF’s etc., Real Estate investments in the form of physical or real estate mutual funds or REIT’s, a good mix of large cap and mid cap stocks, good mix of equity mutual funds, international stocks and international equity mutual funds all are very best to include and create such portfolio.

Advantages: When starting the investment in the young age, the return from such investment should be awesome. It can yield long term returns more that 5000% to the investment amount if selecting the portfolio prudently and intelligently.

Disadvantages: It is not the portfolio for short term investor. Such portfolio will not help to meet short term money requirements and not able to provide income time to time like an income portfolio. High level of patience and investment discipline is required to build and maintain such portfolio. Best example for such portfolio manager is George Sorros, Warren Buffet and John Templeton.

Model 5- Aggressive Growth Portfolio

Nature: Aggressive investment style by nature including high risk but high profitable investment instruments in the portfolio.

Suitable for: Investors who are young and have capacity to take high risk

Investment Instruments: A well mix of mid cap and small cap stocks, sector stocks, commodity investments, derivatives and options, sector and thematic mutual funds

Advantages: Huge profit if investing prudently and intelligently.

Disadvantages: Great chance of lose if not investing prudently. It is not suitable for those who are near to the retirement because its nature.

Read the above portfolio models and details associated with each one. Do a self assessment to identify from which group you are. Do as per that. Always remember that, high risk investments can yield high returns. Low risk and secured investment can yield low returns. All the above mentioned portfolios required a level of study to decide on the investment instruments to be included. Be a prudent and disciplined investor. Best wishes.