Everyone wants a super cool portfolio. (Somehow I’m reminded of the proverb: If wishes were horses, beggars would ride) Thre is a thought process to achieve a good and strong portfolio or atleast to get you started on the journey.
Good friend Manish Chauhan who writes a blog on creating awareness among Indian investors on the importance of personal finance has a thoughtful post on the Four Pillars of Success for a Strong Portfolio. Manish Chauhan is a Software Engineer by profession and investing freak by heart
Some excerpts:
There are some good traits of portfolio which makes it better than others . A good and strong portfolio has some strong elements or parameters which it must meet . These are the Pillars for a strong Portfolio or Investments.
1. Capital Appreciation
2. Liquidity
3. Risk Management
4. Goal Oriented
Lets take each of these points one by one :
Capital Appreciation
This is one of the biggest reason to invest.Isn’t it very obvious? Yes , it is . But the main point is not just its growth in numbers but its real worth . We are talking about Post-tax and post inflation returns .
Liquidity
Another important aspect of a good portfolio is that its provide enough liquidity , so that in case of need , you can get the money .
What is Liquidity ? Liquidity is how fast and easily asset can be sold and you can get cash . For example Mutual funds and Shares are highly Liquid , If you have them and want to sell, you can get the money soon . Where as Real estate is not a Liquid asset . So if you need urgent cash , you might not find right price and or buyer.
Every portfolio must have some element of Liquidity, as per the requirement of the investor.
Risk Management
Every portfolio or investment must be to some level insured or have element of risk management
Goal Oriented
“A good investment is one which has a purpose”
Each and every investment should be done because of a strong reason . I see people who take Insurance policies to save tax at the last rush hour of the year !!! . Better loose the tax benefit and don’t take that policy . That kind of investment is nothing more than a waste or burden. On the top of it these people don’t even need insurance !!!
Read the full post at Manish’s Blog
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