Equity funds are a preferred investment avenue to enjoy returns that are higher than savings bank accounts, fixed deposits, post office schemes, and so on. But market fluctuations depend on several macros and micro factors that have a bearing on the share price. Even the world market conditions will influence the stock market price. So, investors in an attempt to bag higher returns rush to the stock market to earn handsome returns to beat inflation. But many investors usually invest in one single equity fund instead of building up their investment portfolio. Let’s understand if it is correct.
- Why should you diversify your portfolio?
When you invest, you should consider various factors that will shape your investment plans and investment strategies. Consider your personal financial goals, savings, expenses, income, and more. Your short-term and long-term plans will vary depending on how soon you want to encash them and reap the benefits. So, picking just one fund will not suffice your needs. So, spread the risks across multiple funds and asset classes.
- Steady profits
If you lock all your investments for the long term how will you generate income from the funds? Hence, it is necessary to consider those funds like Mutual funds, dividend-paying stocks to ensure you generate some income month on month or at regular intervals to ensure you have money to fall back on in case you go short of funds without having to encash the stocks in a hurry and end up incurring losses.
- To achieve personal goals
The investment portfolio can help you achieve major goals in your life if you create a strong portfolio instead of investing in one fund. For instance, you have been investing in one stock for some time to ensure you can have that perfect vacation you have been planning. But the market price of one particular stock tanks right when it’s time to encash, forcing you to cancel or defer your plans. If you build a strong portfolio you can fall back on them when needed.
- Spread the investment portfolio across various sectors instead of investing in one fund
If you invest in just one fund, the potential of that fund will largely depend on the performance of the company, and sector-wise fluctuation will cause its stocks to increase or decrease. So, consider the sector of the funds and diversify your portfolio. Also, invest in stocks with different market capitalizations.
- According to the performance
It is advised to build the right investment strategy depending on the performance of funds. So, research the performance of all the funds that you plan to invest in by considering their past performances. Building a portfolio can be sometimes difficult and hence choose to take advice from industry experts to make the right investment choices. So, that you can build a robust investment portfolio instead of investing in a single fund.
So, we hope this helps you plan the right investment strategy to build a strong investment portfolio. If you need any assistance, you can contact us.
