How to Build a Strong Portfolio

A well-diversified portfolio is highly crucial to long-term investment success. As an investor, it is important to determine an asset allocation that best suits your personal investment goals and risk tolerance. 

At the same time, your portfolio should be able to meet your future capital and expected return requirements and give you peace of mind. But where do you even begin?

In this article, we’ll explore how to build a strong investment portfolio to help you get the best out of your investments.

Assess your Investment Goals and Risks

The first step on how to make a strong portfolio is to create an investment profile, you need to consider your financial situation, risk tolerance and your investment objectives. The possibility of greater returns comes at the expense of greater risk of losses. 

Decide between a more aggressive portfolio or a conservative one. A more aggressive portfolio should be equities, with a larger portion devoted to equities.

Diversify Asset Allocation

Asset allocation is your portfolio’s basic investment mix of individual stocks and bonds, mutual funds, exchange-traded funds (ETFs), with smaller stakes in other investments and cash. Asset allocation is a crucial aspect of building your portfolio that impacts the risk and return. 

Here are some asset classes that you can choose from when planning

 How to Build Strong Portfolio

• Stocks: Choose stocks that satisfy the level of risk you want to carry, analyse the companies using stock screeners, conduct an in-depth analysis and then purchase them.
• Fixed Deposits:  Ideal for conservative investors, FDs offer capital protection and assured returns.
• Mutual Funds: Mutual Funds are available for a wide range of asset classes and allow you to hold stocks and bonds that are professionally researched and picked. 
• Exchange-Traded Funds (ETFs): ETFs can also be a viable alternative. ETFs are mutual funds that trade like stocks. They offer cost savings over mutual funds while providing diversification.
• National Pension Scheme (NPS): NPS is a long-term retirement-focused investment that combines equity, corporate bonds, and government securities with tax benefits.

 Stay Invested for the long Term

Short-term market fluctuations can be nerve-wracking, but staying invested for the long run helps maximize returns. Avoid making impulsive decisions based on market trends and focus on your long-term financial goals.

Monitor the Portfolio

Financial markets change frequently. So, it is necessary to regularly review your portfolio and make changes. Consider rebalancing to get your portfolio on track. Rebalancing involves determining how much of your positions should be reduced and allocated to other classes. 

To do this, determine which of your positions are overweighted and underweighted and manage them accordingly in response to the changes in circumstances.

To ensure a regular flow of expected returns and capital structure, focus on how to build a mutual fund portfolio that aligns with your goals, risks, and investment preferences. 

If you're just getting started with your investment journey, connect with Tata Capital Moneyfy to explore a wide range of mutual fund options, compare investments, and get professional advice.