Building a Robust Portfolio

Most of the mutual fund investors that I do know are more focussed on selecting the right MF schemes. They believe if they have picked and invested in the right kind of fund their work is done. Nonetheless, experience shows that while we may be right most of the time in selecting funds there are chances that we may go wrong sometime. This may ruin our overall returns and we may or may not achieve the financial goals for which we were investing. Therefore, the right way to plan your investment is to make sure that you have selected appropriate, high-quality stock and bond funds to serve as the core of your portfolio.

This should be supplemented by smaller tactical allocation towards more specific funds in which you have a strong belief and are currently trending. The best example in the current scenario is that of the commodity and pharmaceutical funds. Since these funds are riskier in nature, allocate only a small proportion of your portfolio. This can help you take advantage of more exciting or riskier opportunities without putting your entire investment portfolio in too much jeopardy. This approach of building your portfolio is commonly known as core and satellite portfolio.

There are different ways of selecting the constituents of core and satellite portfolio. In the cover story of this issue we have gone into details on how to select the satellite part of your portfolio. It happens with many of us that we select funds, stocks or other financial products without giving such matters much thought and then later realise that our choices are not serving the purpose for which they were bought. In one of our special reports we have covered what is the right approach on selecting any of the various financial products available in the markets. I sincerely hope that this issue will help you to take informed financial decisions that will make your finances better. Your comments and suggestions would be greatly appreciated. 

SHASHIKANT