What is Portfolio ?

Portfolio means a list of the financial assets held by an individual or a bank or other financial institution.

What is Investment Portfolio ?

Investment portfolio means a group of investments owned by an investor. An investment portfolio represents the set of assets that an investor holds, such as stocks, bonds, property titles, Cash, options, and more. Every people want to earn maximum return on their idle money. Invest money in those assets which gives you maximum return. At the same time, your goal is to protect capital first. Therefore, following some points which are useful to build your portfolio & to earn maximum return.

Points to Remember while building your Investment Portfolio:

  • Always diversify your portfolio to balance Risk as well as return.
  • Never invest whole money into Single company, Into single Sector Companies, or into single category of investment.
  • Same way, don’t invest whole money only in share market or any bank FD or Bonds. Invest proportionately in all categories of investments.
  • All categories of investments have some risk associated with it. You can’t mitigate risk involved in investments. But yes, you can surely reduce risk by diversifying your portfolio.
  • There are two types of Risk in any investment:
  • The first is undiversifiable, which is also known as systematic or market risk. This type of risk is associated with every company. Common causes include inflation rates, exchange rates, political instability, war, and interest rates. This type of risk is not specific to a particular company or industry, and it cannot be eliminated or reduced through diversification—it is just a risk investors must accept.
  • The second type of risk is diversifiable. This risk is also known as unsystematic risk and is specific to a company, industry, market, economy, or country. It can be reduced through diversification. The most common sources of unsystematic risk are business risk and financial risk. Thus, the aim is to invest in various assets so they will not all be affected the same way by market events.
  • Don’t invest whole money in single shot. Invest step by step proportionately & always keep some cash on hand so that if in future any better investment opportunity arises you can get benefit of that opportunity.
  • Review your portfolio at prescribed time intervals, Say Weekly, Monthly or Quarterly. Sell the stocks which are overvalued & invest in stocks which are undervalued and more chances to give more return in future.
  • If you see any big market fall in near future, then hedge your portfolio by trading in Future or Options. So that possible loss in your portfolio can be recovered by trading in F & O.
  • Always build portfolio by keep in mind longer term instead of Short term. In short term, some company may not perform but if fundamentals of company are strong, then surely it will perform best in future.
  • Diversify in such a way that some of your investment will give you extra benefits in taxation also. Like Investment in LIC, ELSS Mutual Funds, PPF will give you income deduction u/s 80C of Income tax Act. Same way income by way of dividend from company, Interest income of PPF, Maturity of LIC all are Tax Free Incomes under Income tax Act.
  • Also keep changing your investments based on Global developments, Political changes, Seasonal business etc. Every single developments in economic, social, global factors are affecting to stock market. Just track the effect well before in advance, surely you will be rewarded best amongst others. Eg. Currently due to Coronavirus Pandemic, all world markets are down but Pharma & FMCG sector companies are performing great. Same way applies in seasonal business, if you are expecting long summer season & demand of AC & cooler will increase than Invest in Cooler & AC companies before start of the summer, Invest in companies which are favoured by ruling govt.
  • Whenever you get chance, average your investments by buying on deep & sell them when market is at the peak. Don’t take any decision by getting panic when market is unfavour. Get rid of Greed & Fear factors. Fear will make you sell the stocks too soon & Greed will makes you hold the stocks too Long.


Keep all the above points in mind while investing your money in any financial assets. Hope this will help you to understand on how to invest your hard earned money in stock market.

Thank you for reading.

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Qualification: CA in Practice
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Location: Surat, Gujarat, IN
Member Since: 05 Apr 2020 | Total Posts: 3

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June 2021