Learn Cryptocurrency
17 Mar 2021

How to Build a Good Investment Portfolio in 2021 – Complete Guide

Nisha Ramesh

All humans have dreams. Some dream of buying a beach house, travelling the world etc., and some others have quirky dreams like landing on Mars. Whether your dream is legit or quirky, the point is that we need to build wealth to achieve those dreams. 

We tend to believe dreams are different from reality – that if you don’t have money now, it is impossible to achieve our dreams. Let me stop you right there and spill the truth.

If you turn your dreams into goals and start investing towards achieving them, all dreams can become a reality (including landing on Mars :P). 

If you have followed Kuberverse for a while, you may already know that investing is the best way to grow your wealth. But you may be pondering over how to go about investing’?

The answer to that is:

Build a good investment portfolio for yourself.

This will not only help you diversify your investments across various asset classes, but you will also own a retirement fund, be debt-free, and have emergency cash. 

In this article, I’ll explain – an investment portfolio, a few safe investments with high returns, and a step-by-step guide on building a good one for 2021 is.

What is an Investment Portfolio?

An investment portfolio can be defined as the cluster of different assets in which you have invested currently.

It can include any number of assets ranging from stocks, cryptocurrency, mutual funds to PPF, bonds, gold, real estate, etc. It also includes the cash and cash equivalents that you own. 

The term investment portfolio is mostly a concept than physical space. Especially in the digital world, you can think of it as the roof under which all your assets are parked. 

Invest In Crypto With Just Rs.100

Steps to Build An Investment Portfolio

1. Assess your Finances

Make a list of all the assets you own. Include all assets, including cash, deposits, bank accounts etc. Then list down all your liabilities, such as student loans, car loan, credit card bills, etc. 

You may need to be honest with yourself here – don’t put something away thinking “it does not matter” or “ill get done with it tomorrow”. 

The key to building a great portfolio is assessing where you are right now. Take a courageous look at the full picture of your financial situation.

2. Open a Retirement Savings Fund

Retirement could be the last on your list when you are just venturing into independently handling finances. But trust me, retirement needs to be given priority before all else. 

Here’s why:

  • Our generation doesn’t have the luxury of getting a pension from our employers.
  • The more you save towards retirement; the more comfortable your future will be.

So, begin by opening a retirement fund such as NPS, EPF or PPF etc. These investments do not require you to make large contributions towards the capital. Even if you spare a small percentage of your income towards retirement, your corpus will build itself over time with the power of compounding. 

3. Build an Emergency Reserve

The pandemic that struck the globe last year has taught us one thing – be prepared. Once you start putting aside money for your retirement, work towards building an emergency fund. This fund may consist of 3-6 months cash reserve covering your basic expenditures in a highly liquid account such as bank deposits or savings accounts. 

This fund will keep you shielded from any unexpected crisis like a pandemic, natural disaster, sudden unemployment etc. Even if the chances for such events are unlikely, what harm is it to keep away some money for times of emergency?

4. Choose your Assets Based on Your Risk Appetite

Risk appetite is your ability to bear investment losses in return for the possibility of earning higher returns from your investments. Knowing your risk tolerance level helps you invest in assets that suit your goals, timeline and personality. 

Where to invest money in India:

  • Stocks – represent your share of ownership in the companies you have invested in. Generally, stocks fall under the high risk, high returns category.
  • Cryptocurrency – is a digital asset that can be used as a medium of exchange and a store of value. This new asset class is known for its high returns. Bitcoin, popular crypto, has returned over a millionfold since its inception. However, it can also be quite risky due to the volatility of the market. Here’s a guide on ‘how to invest in Bitcoin’. 
  • Mutual funds – are the collective funds of various investors, which is invested into securities such as stocks, bonds etc. It is a moderately risky investment that offers moderate returns on investment.
  • Fixed Deposits – is a bank deposit that promises you a fixed rate of interest in turn for a lumpsum deposit over a period of time. FD’s are low-risk assets but provide low returns. 

Some of the other assets for investment include gold, commodities, real estate, alternative assets etc. While your house, car, antiques etc., are considered assets, they do not form part of the portfolio.

5. Determine the Asset Allocation that’s Best for You

Now that you know where to invest, it is time to decide how much money you want to allocate for each of your assets. Splitting your portfolio over various assets at different proportions is called asset allocation. Again, asset allocation should also be done based on your risk appetite. 

For example:

  • Suppose you are a conservative investor (low risk). You may want to invest more in assets like fixed deposits, bonds etc. 
  • If you are an aggressive investor (high risk), you may want to hold stocks and cryptos as a major chunk of your portfolio. 
  • Moderate investors (medium risk) can consider investing in a mix of high and low-risk assets. 

Bottom Line

Building an investment portfolio can be an overwhelming task for some. It may take years to form good shape but do not give up. Keep a steady plan as you begin and stay committed to improving your finances as you go along.

So, See you on Mars?🪐

[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

writer

Nisha Ramesh

Content Writer

Table of content