How to Build a portfolio that withstands every weather

How to Build a portfolio that withstands every weather

1 UNDERSTAND RISK

All your investments are subject to risks. This is essentially the risk of a fall in value of your assets. However, the reasons behind the risks may be different for each asset. This is where you can play smart.

DIVERSIFICATION

Since assets have different risks, you can invest across various assets. So when the value of one asset falls, the other assets in your portfolio continue to give returns! This is called diversification.

3 MUTUAL FUNDS

MFs are inherently diversified. Every rupee you invest helps you buy thousands of Stocks of Bonds. All the Stocks and Bonds may not fall at the same time, thus lowering your overall risk.

4 ASSET CORRELATION

The primary rule of diversification is to invest in assets that move in opposite directions. This means the assets are negatively correlated. Otherwise all your assets would fall at the same time, increasing your loss!

5 DEBT vs EQUITY

Most experts recommend that you have a mix of Debt and Equity Funds in your portfolio. This is because when Stocks fall, the Fixed Income assets like Bonds continue to pay returns.

6 BALANCED FUNDS

When you’re a beginner, it’s not easy to know how much proportion should be invested in Equity and Debt Funds. This is why Balanced Funds are the preferred option. The Fund is already diversified across Equity and Debt.

7 GOLD INVESTING

People consider Gold a safe haven. Usually, when there is volatility in the financial markets, people move to Gold. This is why it’s good to have a small portion of your portfolio in Gold Funds and ETFs. It pays off in times of trouble. 

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