‘The Perfect Investment Portfolio for GenZs’ - Before I get to the first part of this title, let me explain the second part - why this write-up is more meant for GenZs and not a generic one.
Some of us tend to equate our career scenario with the current one. We see only the difference in the salary amount, not knowing that the Rs 100 in the 1960s is Rs 8858 in 2022! (assuming an inflation rate of 7.5%) The prices, background, socio-political situation, investment avenues, and job scenario of Gen Z - everything is different from those of the bygone era. So, using the same old scale to measure success or efficiency is simply brutal.
Now, coming to the first part of the title. Here are some of the ways to construct ‘The Perfect Portfolio’.
1. Present comes before Future:
While we all are in a hurry to rope in the benefit of time in compounding our wealth for the future, don’t lose your sights on the ‘Now’. The role of having an emergency fund in place cannot be stressed enough. Your emergency fund should be ample enough to cover your lifestyle for 6 months, at the minimum. And having it liquid is equally important. FDs or Liquid Funds are ideal for building your Emergency Fund.
2. Debt-free is truly free
If you have debts to be paid off, that should be one of your first priorities. If you let that debt accrue parallelly with your wealth, your wealth building will not be as meaningful. Letting a debt accrue will only result in you paying a higher amount.
3. It’s never too early to think about retirement
Don’t let your peers fool you into thinking that retirement planning is an ‘After 40’ job. The sooner you start, the more comfortable your retirement will be. Moreover, who’s stopping you from planning for an early retirement?
4. Categorize and Prioritize
Random investments may not prove effective in covering all your goals. Firstly, based on the time of fulfilment, categorize your goals into short-term (less than 10 years away), mid-term (10-20 years), and long-term (after 20 years). Next, prioritize them within those categories, so that you can find the right investment for each.
5. Consistency
We’re sure that GenZs agree with us when we say SIP’s brilliance lies in its sheer simplicity. When started early, and empowered by consistent investments, SIPs can prove massive in your wealth building journey. But without consistent investments, you may miss out on much of the growth potential of SIPs. Mr. Buffett is right in saying that “we don’t have to be smarter than the rest; we have to be more disciplined than the rest”.
6. 5 Important Strategy for Proper diversification
It is important to have a strategy in place for asset allocation, that can help you with proper diversification. Here are 5 investment styles, across which your wealth should be diversified equally
- Quality - high quality stocks
- Value - Undervalued stocks that may gain momentum in the future
- Growth at Reasonable Price - A blend of the above 2 styles. This philosophy suggests investing in companies with potential for good earnings growth and are available at reasonable valuations.
- Mid & Small Cap - This is based on the evidence that historically, Mid and Small Cap companies yield better than Large Cap, over the long run.
- Global - This is to provide geographical diversification to your portfolio
Why this Strategy?
- Solid Long Term Annualized Outperformance of 4% over the last 10 Years, when compared to Nifty 50 TRI*
- Far lower declines during major market falls, as compared to Nifty 50 TRI and Nifty 500 TRI*
I hope I didn’t overwhelm you. It’s hard to cover this topic without bringing in the minimum technicalities. If you feel it’s a lot to take in, do remember that you can never go wrong with a SIP. Start small and build your journey thereon. And don’t forget that you can always seek assistance. With the help of expertise, you can tread on your investment journey with much more confidence and ease. In my quest of simplifying financial planning, I have scooped up quite a comprehensive list to the best of my knowledge. See you soon with more insightful information. Happy Investing!
Disclaimer: No Deccan Chronicle journalist was involved in creating this content. The group also takes no responsibility for this content.
