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Portfolio Management

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A General Guide To Portfolio Management & Diversification

Here are a few things to keep in mind:

1. Keep building your portfolio

Portfolio creation is a lifelong activity. Hence, it does not stop at investing the first investable amount. Keep adding funds at regular intervals to enter the market at various points. Keep putting money into various instruments – equities, debt, commodities, gold, etc.

A great way to do this is through a systematic investment plan (SIP). You benefit from rupee cost averaging while also developing a habit of investing. 

You can refer to our module on Mutual Funds to learn more about rupee cost averaging and systematic investment plans.

2. Explore different investment avenues

When it comes to investing, traditionally we consider the common avenues – fixed deposits, mutual funds, shares, etc. Look at alternative investment avenues – there are some hidden treasures in there. Consider commodities, foreign exchange, hedge funds, to name a few. 

If you want to know more about alternative investment products, you can explore our section on Alternative Investments. We have covered the major alternative investment products – which can be a good starting point to build up your knowledge about them. 

3. Explore bond funds or index funds

Including index or bond funds in your portfolio brings stability. These funds are cost-effective, with the entry and exit charges being quite low. As per their specific construct, Index funds invest in a basket of stocks or commodities – thus, being a good avenue for diversification.

4. Know when to get out

With regards to investing, we all time the market to get in at the right time. But be it the stock market or the foreign exchange market, knowing when to get out is equally important. Getting out is important not only to use the high levels of the market but also to use opportunities. If you have invested money in one asset, but it has not performed for a long time, it may be a good idea to exit and invest that money somewhere else which can fetch you returns. 

However, remember, most assets are prone to short-term volatility. Hence, that should be taken into account. Getting out doesn’t mean selling off your assets every time its value drops. Keep a long-term perspective and make prudent decisions. 

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