Diwali 2019 Investment Tips: Want to become rich? Top 5 things to make your portfolio strong

Diwali 2019 Investment Tips: Diwali is one of the best times to build a strong financial portfolio. You enjoy high returns and complete financial freedom. Financial freedom is being free from the money worries and living life on your own terms. You can retire early and follow your passion. Let’s welcome Goddess Lakshmi, the goddess of wealth and prosperity with a strong financial portfolio.

1] Financial Planning for a strong portfolio: Financial planning is meeting life goals with the management of money. This is crucial in making a financial portfolio. Follow the four-step portfolio management strategy to build a strong portfolio.

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Speaking on how to make a strong portfolio CS Sudheer, CEO and Founder at IndianMoney.com said, "The first step is having your short-term, medium-term and long-term financial goals in place to build the policy statement. This statement defines the risk you are willing to bear and the expected return. The second step is assessing the effects of the economic conditions on your portfolio. You can set realistic goals and get a fair idea on the returns from the portfolio."

Sudheer went on to add that the third step is picking securities for the portfolio after analyzing the macroeconomic conditions, industry and the company. Analyze individual stocks before adding them to the portfolio. The final step is evaluating and monitoring the portfolio. Compare the portfolio against a market benchmark to evaluate portfolio performance. This is an ongoing process and you must revisit all the steps at regular intervals. The portfolio must be realigned if your needs or market expectations change.

2] Build a diversified portfolio: Don’t stick to ultra-safe investments as they yield low returns. Investing 100% in debt-instruments means you can’t meet financial goals like children’s education and marriage. Take up growth-oriented assets like stocks and equity mutual funds to increase returns from the portfolio.

 Batting for retirement oriented investments CS Sudheer of IndiaMoney.com said, "More than 76% of Indians don’t save for retirement. You must build a strong diversified portfolio to avoid depending on your children after retirement.  A diversified portfolio reduces risk and protects your investment if any asset underperforms. Equities crashed more than 35% in the year 2008-09. Build a diversified portfolio of equity, debt, gold and keep some cash handy to protect against a stock market crash."

3] Make your portfolio inflation-proof: Inflation eats up the returns from your portfolio. You must earn inflation-beating returns to see gains on the portfolio called inflation-proofing. Have 10-15 per cent of your portfolio in gold. Gold cannot be inflated or printed and has relatively stable purchasing power. The key to beating inflation is having part of the portfolio in inflation-beating investments. Real Estate, gold, stocks, mutual funds and inflation-indexed bonds protect your portfolio from inflation.

4] Build a tax-efficient portfolio: Select tax-efficient investments to increase returns from the portfolio. Don’t just focus on safety and liquidity, but also understand taxation on your investments. NSC, Senior citizens savings scheme and the 5-year tax-saving fixed deposit offer the Section 80C tax deduction up to Rs 1.5 Lakhs a year. The interest earned is added to taxable income and taxed according to your tax bracket. The tax-efficiency of the investment gets reduced.

Elaborating upon the importance of tax-efficiency on one's portfolio CS Sudheer said, "Tax-efficiency is crucial if you fall in the higher tax bracket of 30 per cent. A 5 year tax saving fixed deposit which yields 7 per cent, gives an after-tax return of just 4.9 per cent a year. The portfolio is not tax-efficient. Invest in PPF, EPF or the Sukanya Samriddhi Yojana, which enjoy the exempt-exempt-exempt or EEE status. These investments have the Section 80C tax deduction, while interest and withdrawals are tax-free."

5] Safeguard the portfolio with insurance: Protect the portfolio with term life insurance. This is a pure risk protection plan which safeguards your family on an untimely death within the tenure of the plan. It’s a shield to protect your wealth.  If you don’t have a health insurance plan, the portfolio may have to be liquidated on an emergency hospitalization. If you don’t have the knowledge or time to manage a financial portfolio, take the help of a financial adviser. He would help build a strong portfolio as you celebrate Diwali.

NOTE: Zee Business brings to you an exclusive line up of programming for Diwali 2019 with experts, insights & sharp acumen under Zee Business Damdar Diwali show. A Diwali treat for you! Starting soon from October 14 only on Zee Business.in.