Outlook Money’s Priyanka Debnath gave some quick tips in a recent video that will help an investor find the right equilibrium between asset classes as well as different investment strategies to fetch the desired result.
She suggested different investment options, such as stocks, bonds and core satellite strategy for portfolio diversification, as putting all money in one investment can be very risky, but putting them in different baskets will help in risk mitigation.
Diversification also provides an investor with better results, as loss from one investment can be covered by a different instrument by incurring huge profits and cancelling out the negative. As there is no “one size fits all” an investor needs to customise their investments according to their own risk tolerance and profit needs.
As stocks offer higher growth, but also carry a higher degree of volatility, they are suitable for younger investors who may easily absorb the risks which older investors who have started investing for a retirement corpus may not be able to do, as they are closer to retirement, and therefore, will have lesser time to recover.
Bonds are very stable; however, they offer lower growth making them a perfect option for older investors nearing retirement. These are income-generating assets highly recommended to investors who are closer to retirement, while also offering the potential of portfolio diversification for younger investors.
Core-satellite strategy is a strategy where the investors allocates a significant portion of their corpus into a managed diversified fund or low-cost index funds for diversification and better growth. After allocation, one can apply the satellite to get the “emerging market opportunities” that will fetch the most lucrative results.
Pension plans, social security schemes and rental incomes are some different income streams one can explore for better cash inflow. Different incomes help an investor accumulate a better amount of funds, increased investments, much better diversifications among the asset classes and thus a bigger corpus for retirement.
