By Rajesh Varma Singh
1. Understand your objectives
Your objective depends on various factors such as your future plans, financial responsibilities, your present age, your retirement age, so on and so forth. Besides reward and risk, time is also considered to build your portfolio. If you want to accomplish a goal in few years, you should have short term investments. If there is something you want after 15-20 years, allocate the fund in long term investments.
2. Measure return on investment
Return on your investments is your priority after your objective. Measure return on investment or ROI by deducting cost from profit and divide it by cost. Higher the ROI, the higher is the risk attached to the funds. This way, you can compare investment plans and select as per your risk tolerance.
3. Measure your risk tolerance
ROI should not be the only base to pick any financial stock. You have to check your risk tolerance. If you are young, you can have investment plans that are riskier as you have no other financial responsibilities and have time to cover the losses, if any. However, if somebody is planning for retirement in few years, he does not have enough time to cover up the losses and has financial obligations too. So, there is less room for risk. Furthermore, consider your capital also. Retirement should not stop you to take the risk if you have enough capital with you.
4. Move forward with your experience
One cannot become so aggressive when he is a new player. It takes time to learn and understand. If you are new to investment, put forward your funds in a limit so that even if there is loss, you are able to manage other things.
5. Own the financial products you know more about
It is always in best interest of the investor to invest where he has knowledge. If the person is aware of entire know-how of particular industry, he would be able to gauge well its success or downfall. He would understand which stocks he should maintain and which ones are to be sold.
6. Revise your portfolio once in a while
Market conditions are never constant. As well as an individual’s financial requirements and situations keep on changing with time. Reviewing the portfolio at regular intervals of time helps an individual to understand where he is lagging behind.
A good research and diversification is all you have to do to build a sound investment portfolio. Not only does it help you to protect and grow your assets, but it will also facilitate you to accomplish the future goals.
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