Building A Long-Term Portfolio
Staying invested for the long term might sound like a difficult task. We are going to tell you how easy it is and where you should be putting your money for the long term.
Investing for the long-term comes with its own set of benefits – the power of compounding will help you earn more returns if you stay invested for a long period of time. However, this doesn’t mean that you can throw your money in any instrument that you want. A long-term investment portfolio should be built strategically so that you can make good returns without worrying about any unexpected incidents.
Preparing Yourself for A Long-Term Portfolio
Before you build a portfolio for the long-term, you should get your finances in order. Create a plan to manage your debt, and set up an emergency fund. These two things are highly crucial and you have to allocate a portion of your salary every month towards paying off your debt as well as building an emergency fund.
If you are not creating an emergency fund, and then proceed to put money in long-term investment instruments, you might be pushed to take money out of them when an unexpected problem arises. When you redeem money from your long-term investments, you might be selling them at a loss. To avoid these problems, plan properly before creating a long-term portfolio.
Deciding The Time Horizon
Everyone has different long-term goals. It could be saving for retirement, paying for your child’s education, saving for a home down payment, traveling the world, and more. The important thing here is you need to find out the time horizon that you are comfortable with. Usually, long-term investing means five years or more, but it could be longer than that.
Stacy Francis, president and CEO of Francis Financial in New York City told Forbes Advisor, long-term investing can be put into three different buckets, based on the target date of your goal: five to 15 years away, 15 to 30 years away and more than 30 years away. So, find your time frame and write it down.
Drawing A Strategy for Long-Term Portfolio
If you are someone who is young, and want to stay invested for 15 years, then you should have an aggressive portfolio, which means a portfolio of 50% to 60% in stocks or small cap mutual funds, and the remaining in debt mutual funds or recurring deposits. The most aggressive portfolio could have up to 85% to 90% in stocks.
On the other hand, if you are someone who is over 45, and want to stay invested for 15 years, then it is better to have a conservative portfolio. This means, 30% of your portfolio can be in stocks or small cap mutual funds and the remaining 70% can be in safe assets like debt mutual funds, recurring deposits, government bonds.
Mixing It Up
The secret to creating the best long-term investment portfolio is diversification. If you are someone who is 25 and want to build a portfolio for 20 years, it can be diversified into something as we have mentioned below:
- Stocks / Small or Mid Cap Mutual Funds – 60%
- Digital Assets – 5%
- Insurance Policy / ELSS / PPF / ULIPs / NSC – 25%
- Smart Deposits / Digital Gold – 10%
If you are someone who is 40 and want to build a portfolio for 20 years, it will look something similar to this.
- Smart Deposits / Government Bonds / Recurring Deposits – 65%
- Tax Saving Deposits / Insurance Policies – 20%
- Multi Cap Mutual Funds / Stocks – 15%
After you have created the portfolio, it is crucial that you track the performance of the instruments that you have invested in. There are new instruments that are coming into the market every now and then. So, if you feel there is a new product that will suit your financial needs, you can include it in your portfolio. Also, if you feel that there is a product that isn’t giving you as much returns as you expected, you can replace it with something else that will help you achieve your goals.
This is crucial as the times are changing, and inflation is rising. So, your portfolio should be able to give you inflation-beating returns over a long period of time. Keep a track of your portfolio’s performance every month or so, and also, follow the news so that you can be prepared for unforeseen events.
In The End…
Everyone needs a long-term investment portfolio for wealth accumulation, tax saving, achieving financial goals and more. Creating one is easy and if you are looking for a platform who can do all of this for you, you can choose Koshex. It is a new-age wealth management platform that will design a customized portfolio for you, based on your goals and risk profile. You can also invest in Mutual Funds, Smart Deposits, and Digital Gold through Koshex, and track the performance of your investments from one place as well. Doesn’t that sound cool? Head to Koshex and create your account today!