Generally, basic Investment objectives and approach' always changed for every investor throughout their lives. The objectives usually vary among the individual goals like capital appreciation, regular income through dividends or high growth and so on, while the approach can be aggressive, conservative or combined those two approaches equally. As plenty of investment options or alternatives available one can research and take the decision to diversify his/her investments himself or also can take the help of the professional.
Further, the diversified investments also referred as Investment Portfolio. The common misconception prevailed that the diversified portfolios meant to be for High Net Worth people with huge capital and surplus money. Actually the fact here is that the well diversified investment portfolio is a must have for every individual no matter how big and small is the investment surplus. Well diversified portfolio reduced the risks to minimum and secure the investments.
Portfolio diversification consists of the different investment products or instruments' including Stocks, Bonds, Funds, Bank Deposits, Insurance, real estate and commodities or bullion including Gold, Silver.
The recent example, that helped the investors with diversified portfolios is that the falling stocks losses have been offset by the rising gold prices, certainly not set off equally but at least provide some relief to the investors in the present unexpected financial crisis. If you concentrate you will find out that' all this happened in a very short period, it is expected that in medium to long term the stocks will come out of the present pressure. This clearly points out that the portfolio diversification is the helpful and vital tool for investment decisions
Investment objectives provide platform for portfolio composition. Next is the investment approach. Every investor must heard that large gains can only be made with larger element of risks. This sound correct to some extent but the irony is that this phrase has highly misunderstood, How can any rational person could take the risks above the limited capacity, the answer lie with the human sentiment that often reacts adversely under uncertain situations of panic or greed.
As mentioned above, Portfolio must consists of diversified areas of investments, today we consider equities for further review. Equities usually considered as an aggressive approach of investing, because the returns from equity is highly unpredictable, But equity investments in a well established and financial sound companies with long term approach always pays off handsome gains. Also equities are the very liquid investments, you can sell equity shares any time in the markets hours. The timings and research are the vital factors while considering investment exposure in equities. You can invest in equity considering your investment surplus and the percentage to invest in equities. The ideal percentage can be around 20-25% in a systematic way, it varies person to person. Always keep half the balance from equity portfolio in liquidity to buy when the markets give the chance.
It is important here to understand that investment in equities should be based on the knowledge, research and disciplined approach, despite knowing this fact many people just speculate in equities on so called tips or rumors which usually turn out to be a destructive decision. For example' The very basic characteristics prevail in equity markets are fear and greed. In rising markets many people get attracted toward equity markets after listening the stories of making fortunes and as we witnessed these days many people got panicked in uncertain markets, in both cases it is the very basic and big mistake. As I always recommend, it should be like 'Sell in the pink of health' and panic gives the chance to investors built up their positions.
