For News18, Angel Broking Limited, DVP- Equity Strategist Jyoti Roy is telling about five such essential things in the financial portfolio, from which we can decide our return and risk. Jyoti explains that the recommendations of financial advisors are usually fixed according to the risk return profile of each asset class and risk. We can also manage our financial portfolio knowing these things.
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1. Investing in domestic equity
It is a financial asset which is the equity of the companies listed on the stock exchanges of India. You can buy shares of any company directly, which is called direct equity. Similarly, investments can also be made through mutual funds. Investing through mutual funds is generally considered a safe bet. Compared to direct equity, it is generally believed that funds typically invest in a basket of 25–50 shares. They diversify risks and are managed by a professional fund manager with years of experience.
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2. Fixed Income Securities as a Low Risk Option
For those investors who do not want to make high-risk investments, the fixed income option can be a viable option. It is ideal for retired people. Even for those who want to avoid taking risks. Fixed interest rates ensure higher estimated returns than equity. Fixed income investors have many options for choosing government and corporate bonds, fixed deposits, fixed income mutual funds, etc. In the case of corporate bonds, the secured bondholders have to pay first against the other shareholders in case the company goes bankrupt. Diversifying investment through government bonds can be beneficial and reliable, as the government is guaranteed. By default the risk is almost negative.
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3. Investment in gold in times of uncertainty
As an asset class, gold has always appealed to Indian investors. Interestingly, over time, investment options in precious metals have increased. Now we have Gold, Gold ETF, Gold Coins, Bar, etc. in electronic form through Gold Bonds. Gold ETFs are now being traded on digital payment gateways as well and they hold the same value of purity as the pure form of gold. Also, for starters you can trade less than one gram of gold. Beyond various forms of procurement, gold serves as a hedge against inflation and is considered an option in times of economic uncertainties such as the global financial crisis or the current Kovid-19 pandemic. If you take gold prices from a perspective of more than a decade, there has been a massive price increase, which indicates its value for a longer period.
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4. Investment in international equity
It is common knowledge that indices like Nasdaq 100, NYSE, Dow Jones Industrial Average, etc. in the US provide an opportunity for diversification, as well as provide equal or better returns than their Indian counterparts. For example, if we compare the Dow Jones and the BSE Sensex over a 10-year period from 2010 to 2020, the Dow Jones returns 196%, while the BSE Sensex returns 150% in this period. However, questions have been raised about the top stocks generally unacceptable to the average Indian investor. For such scenarios, fractional trading is also an option for retail investors, in which, an investor can own a part of a share. From 1 dollar to 250 million dollars can be invested in it.
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5. Securing the future through investment in insurance
Investing in insurance is one of the safest bets when it comes to managing financial portfolios. Any untoward incident or life-threatening health ailments can be safely dealt with, as insurance protects people from high medical expenses. In terms of taxes, investing in insurance can also be a boon, as the profits from them are not taxed. Insurance or health insurance is helpful for both the individual and his family in the long run, as it is done for the sake of livelihood. In addition, many plans are offered by various insurance service providers, and monthly premiums are often cheaper for professionals working over time.