How to construct and manage your investment portfolio in 4 simple steps -  The Economic Times

Ever seen a successful investor?  What do the think might be the secret of the success? Many people who have gone into one financial investment or the other had a financial goal, or not, before venturing into the investment, which explains the differences in success rate. 

Some may have successfully built a portfolio through the various investments they make. But then, building a portfolio can be easy. When it comes to managing it, that’s a different ball game. You have to be careful with inflows and outflows. You should also be careful about where you invest and that is why you have to review investment companies to find the perfect option. 

Here are some ways for you to manage your portfolio successfully.

  • Build a Margin of Safety into your Investments

This begins from where and when you should invest. Be conservative so that you will not be swayed easily by recent events of success in the market. Otherwise, you will end up overpaying for an unrefined business simply because the “times are good.” Be sure that the deal you are getting is fair; that’s part of the safety margin. Consider the estimated intrinsic value and pay a price that is nowhere near 80% of it.

  • Reduce Costs as much as you can

Invest with a firm that has low brokerage fees or one that gives you a discount. It is advisable that you pick long-term investments over short ones to minimise risks. But while on long-term, don’t buy and sell at short intervals according to market conditions. The aim is to cut down on commission expenses and reduce risk of cash losses in the event of a decline.

How much should you invest in stocks, and how much in bonds? Your level of risk tolerance determines how you find each asset. Make a list of your Investments: equity, real estate, bonds and cash, and the basic allowance for each. You can consider the strategy that suggest you allocate a ratio between equity and other assets in the portfolio.

  • Invest in Assets Within the Boundaries of your Knowledge

You should know what you are investing in to help you make informed decisions. For a production company, how well do you know their products’ rate of consumption? This is what helps you to predict and estimate the company’s growth rate. You must understand how the business makes its money to make such predictions confidently.

  • Invest in a Broad Range of Market Categories

Putting all your money in one stock increases the risk of financial loss. A good strategy is to split up the total portfolio and invest little percentages in different stocks. You can invest more money at regular intervals after considering the strength of the market. That way, if two or three stocks decline, you won’t have much to lose.

Selling your stocks frequently can accumulate charges for you. If you have made a long-term investment, please don’t be in a rush. There will still be opportunities for you to sell in years to come. Remember, you need to build a margin of safety in your Investments, and invest only in assets you understand.