Thursday 8 April 2021

Real Ways to Strengthen Portfolio Returns


 Real Ways to Strengthen Portfolio Returns


Today we are going to discuss what you should do to generate a good return on your investment portfolio. Many of the people feel that you should do extraordinary things to generate good returns on investment portfolio. But on contrary you don't need to do anything extraordinary at all. Simple ordinary steps which I'm going to discuss now then you investment portfolio should be doing very well.


Avoid Making Mistakes

Do not do mistakes, if mistakes are inevitable, keep the mistakes as little as possible. It’s pretty are needed to learn from your own mistakes. It’s extraordinary to learn from others' mistakes. Please learn from people who have done mistakes in their life. Don't do mistakes if mistakes are inevitable keep them under control and make them as little as possible. If you keep on making repetitive mistakes then you are bound to decrease returns on your portfolio. Bad investments offset the returns from good investments and hurt your overall portfolio. One bad mistake can ruin the whole portfolio and result in irrevocable loss to the wealth. To steer

clear of them, practice extra caution and produce flawless output. Getting Swept Up in Market Euphoria, Trading Too Frequently. , Putting All Your Eggs in One Basket, Treating Your Home as an Investment are some of the most common mistakes.


You don't have to have great savings

You don't have to have great savings, you don't have to save a lot of money to generate a lot of wealth. More important is disciplined ways of savings. If you're saving just a pretty ordinary 10000 rupees per month and you save it for 30 years and your investment generate just about 10 percent profit still you able to make more than 20 million. If you invest 1.5 lakh every year in PPF and you just get 7% interest then even in 15 years you able to get more than 37 lakhs, and if you ready to keep it for 15 more years it can be more than 10 million. So it’s more about habits, if you can save regularly you can do miracles. There is much to learn from older people who consistently saved a small amount all through their working lives and were rewarded with a handsome amount, on which a sizeable rate of return had also accrued. So yes, tiny drops fill up an ocean not just in poetry but in finance too!



Don't try to aim a particular rate of return

Don't try to aim at a particular rate of return, see people used to say that my expectation is 15 percent or 20 percent. You should aim at inflation hurdles to be crossed. The purpose of any investment portfolio is used to generate returns that beat inflation. You need to have some clear objectives in life, like higher studies of children. In this case, you need to see that when your children start going to higher studies, do you able to meet their expenses. You can achieve goals of life, not particular returns anyway. Money has a purpose, it's just not the quantity of money that the amount of investment that you've made is for a purpose for example it could be just an emergency fund or it could be the money that you'll set aside for your children's education. Realistic expectations of the rate of return will not only ease the pressure on your mind but will also enable you to adopt a practical approach when it comes to saving and investment. Talk to experts to arrive at what exactly the rate of return should be, keeping the market forces in mind. To return to the question of what a desirable stock portfolio rate of return is, it would seem that if you, as an individual investor can achieve returns on your investments that beat the average investor's long-term average of around 5.5 percent, you're doing pretty well.


Don't invest in anything which is in fashion

Trending investments tend to be in the last stage of growth by the time they become trending. When something becomes the talk of the town and everyone is talking about it then it is bound to crash as every asset has a particular circle in which it goes up and then falls back. Normally people are investing in a bull market but they forget that continuing to contribute to your portfolio during a bear market is even more important. If your portfolio is falling in value due to negative returns, your contributions will be the only factor that minimizes the decline. Investing in IT companies in 2000 but then it gets crashed more than expected. About 100 percent of the money has been lost for many people by investing in these IT companies. Another problem is that individuals have a low attention span when it comes to investing. This coupled with a deluge of information in media on the latest “in thing" leads to the tendency to invest in the first thing that catches the eye. Everybody knows the mutual fund disclaimer on past performance. Yet most choose funds based on recent performance. They believe that in the coming period, they will make similar returns to that in the last year.

A conservative approach, favoring the stocks and bonds that have stood the test of time would be a safer choice. Do not get tempted by a flash in the pan, but repose faith in companies and investments showing a consistent track record.


Don’t overexpose yourself to a single asset class

The right combination of stocks, bonds, and cash can allow a portfolio to grow with much less risk and volatility than a portfolio that is invested completely in stocks. By diversifying, you're spreading your risk across different sectors, industries, management styles, and geographic regions.

Some people say only properties can work. And some so many people say this stock market is the only best investment. No single asset class works continuously. Each class has its time either as the class goes to recycle so successful investment plans should invest in every asset class and not into one single asset class. Spread your investments into areas such as asset classes one of the other asset classes. As they say, do not place all the eggs in one basket. Having a variety of investments would enable you to absorb the shock of one investment failing, from the gains generated by another category of asset. Diversification is the key.



Rebalancing is all about returning your portfolio to its original level of diversification. If you originally planned to have 60% of your portfolio invested in stocks, 30% in bonds, and 10% cash, it will be time to rebalance if your stock allocation has grown significantly higher than 60%. Periodically assessing the performance of your portfolio helps to ensure that you are on track to achieving your financial goals. If the portfolio performance is below expectations, then you must analyze and identify the reason for the said underperformance. You should be willing to let go of one category of investments and have more of another category, to bring in a balance. It has to be done scientifically, looking at the rate of return and the prevalent market forced, not arbitrarily.


Take Advantage of Tax-Efficient Accounts

There is a great risk of taxation on your portfolio, as by getting a 10% return if you have to pay 30% in tax then you need to think again. Trading generates capital gains, and capital gains result in capital gains taxes. If you have short-term property gain then you have to pay tax while if we can keep it long-term gain then you have to pay less or no tax. Those taxes – along with all of the trading fees involved – can result in a portfolio that doesn’t perform materially better than a buy-and-hold model that’s invested primarily in funds. In India, PPF, National Pension Scheme, Sukanaya Smridhi Yojana, ULIP, etc are examples of tax-efficient investments. . As an investor, one should look for investment options that not only help you save tax but also generate tax-free income.


Think Long-term

Disciplined Savings & Patience to let Investments grow are the keys to better returns. Probably the worst delusion that can affect any investor is the “get rich quick” mentality. It’s especially hard to resist during bull markets. Everywhere you look, experts are promising that you can double or triple your money in just one or two years by following their plan. It’s utter nonsense! Long-term investments are generally assets like stocks and real estate that you plan to keep for a while. They provide opportunities for growth in your portfolio because you know you won’t access the money for a significant period.

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