financial investment portfolio
  • How to Build a Smart Financial Investment Portfolio?

  • Published By:
  • Category: Finance
  • Published Date: July 14, 2018
  • Modified Date: May 13, 2020
  • Reading Time: 7 Minutes

Featured Image Caption: Financial Investment Portfolio

Do you remember the older generation family members of yours, how every time there was some money crunch or financial need in the family how they used to come up with the money just from nowhere? Well it was not just some magic but what we call today- financial planning!

Today we hire people to do that job for us but back in those days old grandparents were so sufficient and knowledgeable that they did the job for themselves.

It is always essential to have a kind of balanced money portfolio to support you in the needs of thick and thin. You not only can be at peace but will also be prepared that you have all the money when the need arises. In order to have a good investment plan it is very important to have a plan in itself in first place and then the way to go forward with it.

Having a good financial portfolio is no rocket science and can be achieved very easily if done in a balanced and well researched manner.

Here are some of the key points to develop a good investment plan:

Find Out Where Is Your Money Going

The very first law of investment is to know where exactly is all your hard earned money going and where it is being used. It is very important to maintain a budget considering all the details and understand what is necessary and what is not.

The best way to do so is to keep all the expenses noted down somewhere, have a small notebook and jot down even the smallest amount that you spend, it will help you get to the corners which sometimes gets overlooked. Every time you spend money somewhere note it down in that book, this will later help you analyse what is important and what is not. Now that we are so tech savvy and always have a mobile phone around, it is very easy to follow this as there are so many apps available which can aid you in getting this job done.

You need to keep doing this for at least 3 months to get a clear insight, and at the end of every week just sit and go through the expenses that you made and categorise the important and not so important ones. By doing so you will be able to know what you should not be doing in the following days to come.

Just don’t fret working yourself up on this, this is just for you to understand where your money is going, the planning stage comes later on.

Set Goals for Yourself

In order to achieve something you need to have a goal in place. To develop a good investment plan, find out what you want to do in your life and where you choose to be in the coming years. The answer to this question should be quantitative and not qualitative. Have it listed clearly like if you want to have house of your own in the next 10 years or you want to be debt free by the time you are 40.

The idea here is to be realistic and not generic. You need to be sure about things and need to be real if you want to achieve your goal, you don’t want to fail.

Have Insurance in Place

In order to safeguard yourself and your family from the unforeseen circumstances, it is very important to have an insurance in place. Presently if you do not have a family of your own, it is a good idea a have a disability cover which will help you in cases of any disability and will aid you with your income. For people having family, along with disability insurance it is very important to have a health cover and home insurance. You need to be prepared for all the unforeseen things that might come your way and you need to make sure your family and you are safe and well prepared for these.

Know About Your Credit Score

Today if you wish to avail any kind of loan you need to have a good credit score or CIBIL, without which you can never be able to get through those checks.

Every once in a while go through your CIBIL report and make sure the information mentioned there and the one at hand is matching and there are no discrepancies. If you see any discrepancy raise it with the team from where it has been reported. This is very important in order to get the loans smoothly.

Start Developing Savings

The moment you hear this word savings, your WANTS come into picture. In order to save money you need to differentiate between NEEDS and WANTS. You might need a lot of things but you need to figure out, whether you actually need them. The idea here is to know about your expenses and not just about your monthly income. Even if you are earning quite a good amount and can afford to splurge, do not fall into that. Control your expenses and develop savings. This will only help you later on in life.

After analysing this. look out for ways where you can cut down on these expenses and do so, but just don’t be harsh. Remember, habits take time to change. The goal here should be to look out for ways to develop a lifestyle and carry on the habits for life and not just for the time being. Look at saving at least 10% of your income. Start putting this money into a separate account and have at least 3 months of salary in place. In case of emergency you can use this money but make sure to put it back as soon as possible.

Develop a Portfolio

After developing that emergency funds, come the time to start developing a financial portfolio. You need to start to look beyond just savings and start investing. Investing in mutual funds is the easiest way for the beginners and you can choose the kind of risk you are willing to take at this stage. Mutual funds will not only give you good investment but will also help you spread your risk. It will also provide you professional help just in case you are not aware of the market norms.

Make Sure Your Plan is on Track

To ensure the plan that you have chosen is in line with your financial goals it is extremely important to keep a thorough check on the plan. The plan that you have should always be in line with your goals. You need to keep on checking regularly how the investments are performing and what are the returns like.

It is a good idea to review your plans every three months to see if they are in line with your needs and are giving you returns as per the set lines. Always keep your long term goals and short term goals separate. Do not mix them up and have investment plans made according to them.

Have an Exit Plan

Just like having a good financial portfolio is important it is equally important to have a good exit plan in place. Just to make it sound simpler, an exit plan is something where you need to dissolve your money to achieve the goal which you have set. This is the time where you need to bring out the money that you have been saving all this while.

Having a good investment plan takes time and can just not be developed overnight Spend some time and have it done in a better manner to achieve your goals.

By Finance Gab
who are the personal financial advisor in India.

Member since January, 2018
View all the articles of Finance Gab.

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