Correct portfolio mix can increase returns
Feb 18, 2014
Source : The Times of India

 

DELHI: To optimize an investor's returns from a portfolio and minimize the risks in it, there should be a correct mix of investment options. And such options could include mutual funds (both debt and equity), fixed deposits (FDs), insurance, gold and real estate.

Although each of these investment products may not be suitable for every individual, they are the popular ones as they constitute most investor portfolios. Financial planners and advisers say that while trying to reach the perfect mix of investment products in a portfolio, the basic parameters like efficiency, diversification, risks, returns and costs should be kept in mind.

Also, there are several other factors that could influence the composition of a portfolio. "There is a lot of dynamism in the market and factors keep changing all the time. What might be good today may not be so after a year," says Ramalingam K, director & chief financial planner, Holistic Investment Planners. "Due cognizance needs to be taken of market volatility and the overall economic outlook which provides the outline for a good investment portfolio," he adds.

Before we delve into the composition of a portfolio, we should also look at the reasons for having a portfolio that is diversified into these five investment products.

Allocate assets

According to Tarun Birani, founder & CEO, TBNG Capital Advisors, there are five important reasons that could prompt an investor to go for asset allocation. "It works as a rebalancing mechanism in the portfolio. It also helps in reducing the overall volatility of the portfolio," says Birani. "In addition, asset allocation brings in diversification to the portfolio, brings in investor discipline and the reduction in overall volatility helps in achieving the overall financial goal for the family," he adds.

FDs for lower risk

According to Ramalingam, bank FDs are ideal for investors with a low risk appetite. They are best suited for periods of up to one year or less. While investing in FDs, you should remember that premature withdrawals can attract a penalty, so the investment horizon needs to be finalized beforehand. "When markets experience volatility, FDs are the best place to park funds. Though the returns post tax could only be around 7%, FDs would safeguard against erosion of capital," he said.

You can set aside a percentage of your corpus for investments in FDs, and that percentage will depend on the market conditions, your propensity to take risks and the overall investment plan.

MFs provide stability, growth

Mutual funds can provide both stability and growth, and they provide small investors with an opportunity to make investments in an array of stocks and debt under one fund umbrella, and they are handled by a professional fund manager who invests in the market based on a number of parameters. "The major benefits of mutual fund investments are that they provide a safety blanket to investors' funds, diversification is offered and the funds are handled by the fund manager in a transparent manner," says Ramalingam.

For mutual funds too, the percentage of corpus to be invested will depend on priorities, the stage of life in which the investor is and, of course, the risk propensity, he points out.

Insurance is a must

Insurance offers you a perfect risk management plan and financial planners suggest one should take the online ter m insurance option against financial loss from the sudden demise of the breadwinner. Health insurance policies take care of the unexpected hospitalization expenses, while property insurance covers you from the risk of any natural perils destroying your property.

Gold acts as a hedge

According to Gurleen Kaur, a Delhi-based financial consultant, gold as an asset class is a protection against economic downturn. "Gold is a good diversification tool and it also acts as a tool against inflation. Moreover, gold holds an emotional value more than its financial value and is found in almost everyone's portfolio," says Kaur.

According to her, real estate is another important part of the portfolio. "Generally, it is seen that in India, real estate holds a significant component of one's investments and, according to trends, the real estate is generally transferred from generation to generation," says Kaur.

Next week

In our next edition, we will try to decipher the takeaways for investors from the Vote on Account presented in the Parliament on Monday.

Latest Realty News

DDA holds camp for mutation of property
Feb 18, 2014
DELHI: There was a mixture of hope and scepticism among applicants at DDA’s Lok Shivir, a five-day camp to expedite the process of leasehold to freehold conversion. While some people came out of the camps with conversion deeds in their hands, some complained of insufficient assistance provided by DDA officials at the camp. According to authority officials, 500 applicants turned up at the Shivir on February 17, of whom 378 applicants were issued conversion deeds on the spot. Those who did not get
HSIIDC goes online to allot plots
Feb 18, 2014
DELHI: With the financial year drawing to a close, HSIIDC, the industry authority, is attempting to attract new investors to the region. The latest in a series of systemic upgrades announced by the corporation’s head offices is the new online facility for prospective entrepreneurs planning to invest in Haryana. The ‘online mode’ for allocation of industrial plots aims to make the process of allotment speedier.
New bill proposes licences for real estate brokers
Feb 18, 2014
NOIDA: The UP government has planned to draft a new law to tighten the noose around fraudulent real estate agents so that interests of homebuyers are protected. A senior official in Lucknow said that under the law dealers are required to register themselves with a local government body and obtain a license for practicing.
JLL’s reaction to the Interim Budget
Feb 18, 2014
DELHI: The issues pertaining to real estate are deeper and more inherent than those pertaining to consumer durables or the automobile industry. Resolving these issues involves fiscal adjustments to key real estate-linked policies and may even require constitutional amendments. It was therefore self-evident that the current VOA budget would not hold anything of real consequence in store for the real estate sector. That said, the support extended to the residential sector in the affordable segment
DDA holds camp for mutation of property
Feb 18, 2014
DELHI: There was a mixture of hope and scepticism among applicants at DDA’s Lok Shivir, a five-day camp to expedite the process of leasehold to freehold conversion. While some people came out of the camps with conversion deeds in their hands, some complained of insufficient assistance provided by DDA officials at the camp. According to authority officials, 500 applicants turned up at the Shivir on February 17, of whom 378 applicants were issued conversion deeds on the spot. Those who did not get
Vote on Account 2014: Realtors unhappy with interim budget
Feb 18, 2014
DELHI: Realty developers today expressed disappointment that interim budget did not provide any relief to the sector but hoped that steps to push growth in other industries such as automobile would boost housing demand.
Allotments for 900 plot owners in Gurgaon
Feb 17, 2014
DELHI: The HUDA administrator said the process will begin on February 17 and would go on for a week. Each day a specific plot size will be allotted in the draw. The plots will be given to those who had not been given land in Sector 56-57 due to litigations.
DDA to release 21,000 hectares for housing
Feb 17, 2014
DELHI: End users and investors will have great opportunities to buy houses in Delhi at relatively affordable prices. In the last one decade, growth in the National Capital Region (NCR) was mainly driven by the construction activities in the satellite town of Gurgaon and Noida. This was mainly because of unavailability of land in Delhi.
DDA camps for mutation of property
Feb 17, 2014
DELHI: One of the biggest problem people face in dealing with the Delhi Development Authority (DDA) is when they have to convert the title of their property from leasehold to freehold. In a bid to clear as many pending cases as possible, DDA is holding a five-day special camp at its headquarter, starting Monday.
40.72 lakh high spenders in the country under tax scanner
Feb 17, 2014
DELHI: Over 40.72 lakh high value spenders are under the scanner of the Income Tax department which plans to check potential evasion instances before the closing of the financial year on March 31.

Latest Realty News Of State

Realty Talk's