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Finance is full of common terms that are used in everyday conversation and analysis. If you’re new to the world of finance and investing, the term portfolio might be a word you hear about often.
We’ll help you understand what a portfolio means, explore different investment philosophies and how Cube helps you build the perfect portfolio.
An investment portfolio is a basket of securities that contains investments like mutual funds, US stocks, Indian stocks, alternative assets, digital gold, and more.
It’s like a grocery cart that contains various products (investments) of different sizes (portfolio asset allocation) each with its own functionality, flavour, and colour (diversification). You can also consult a Cube Wealth coach or download a Cube Wealth application.
An income portfolio generally consists of stocks like Intel or Johnson & Johnson that pay a dividend and bonds that can generate a fixed income through coupons.
Income portfolios are often misconstrued to be regular cash-generating portfolios. But they are not. The reason is simple - dividends and coupons are reinvested by default.
You’ll have to pay a dividend tax if you want the dividends delivered to your bank account. But dividend and coupon payments are less volatile than future stock prices because they are promised by the company.
On the other hand, alternative investments like asset leasing, P2P lending, and consumer loans via merchants can generate recurring monthly payments (cash) deposited directly into your bank account.
This is where diversification comes into play. Your portfolio can have exposure to both market-linked assets and non-market linked assets in varying capacities based on your risk profile.
A growth portfolio aims to deliver one thing - capital growth which basically means higher value. A growth portfolio generally does not contain dividend-generating stocks.
Instead, portfolio asset allocation involves shares of companies that have a keen eye for expansion, acquisitions, and a strong balance sheet. Naturally, large-cap and mid-cap stocks fit this bill.
Other investments that could be a part of a growth portfolio include large-cap, mid-cap, and flexi-cap mutual funds, Exchange Traded Funds (ETFs).
A value portfolio follows the fabled value investing approach popularized by Warren Buffet. The logic is to invest in companies that have a strong balance but are trading below their intrinsic value. You can also consult a Cube Wealth coach or download a Cube Wealth application.
The markets may be slow to realise the potential of these stocks or investor sentiment may have been swayed elsewhere due to which these shares may trade below their intrinsic value.
A value portfolio can include large-cap, mid-cap, small-cap stocks and funds along with ETFs. The overall aim is to hold these investments for the long term to generate returns through a mixture of dividends and capital growth.
The Cube Wealth app helps you build the perfect portfolio of assets from the world of US stocks, mutual funds, digital gold, and alternative assets. Cube does this with the bucket philosophy or 9-box model for:
The assets on Cube Wealth are recommended by experts like Wealth First who have a track record of beating Nifty by ~50% over the past decade and RIA Rick Holbrook who manages ~$130 million for HNIs.
Watch this video to know more about building the perfect portfolio
Ans. Diversification helps reduce risk by spreading investments across different asset classes. It can provide a buffer against market volatility and prevent overexposure to a single investment.
Ans. Your risk tolerance is influenced by your financial goals, time horizon, and personal preferences. An assessment of your comfort level with market fluctuations can help determine the right level of diversification.
Ans. Yes, investing in international assets can add another layer of diversification by exposing your portfolio to different economies and markets.
Ans. A financial advisor can help assess your financial goals, risk tolerance, and recommend suitable investment options to create a well-diversified portfolio tailored to your needs.
A financial investment portfolio is a comprehensive collection of various assets, including stocks, bonds, real estate, mutual funds, exchange-traded funds (ETFs), and other financial instruments. The primary purpose of constructing a diversified investment portfolio is to spread risk, optimize returns, and align with individual financial goals. Diversification allows investors to benefit from the performance of different asset classes while mitigating the potential impact of market fluctuations. Careful planning, regular review, and adjustments to the portfolio can help individuals work towards financial security, capital growth, or income generation, depending on their unique objectives.
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