A portfolio is defined as a collection of investments held by an individual or an institution. A portfolio lets you have a bird’s eye view of your investments. Creating a portfolio though can be a daunting task. A portfolio needs to be created taking in to consideration various factors and the expected expenses over the years. The factors influencing an ideal portfolio creation are:

Age is a deciding factor in most of our endeavors. Likewise in portfolio creation. It is advisable to start saving young to get maximum benefit. As you get older it is advisable to start saving more and invest less.

How much money are you earning and how much is actually being saved? The calculations involving investments should always be done on the amount of money that can be saved, that is, total earned minus total spent. The total amount of incoming money will decide how much has to be invested and how.

    Are you ready to risk your money for higher gains? The riskier the investments the higher are the returns.

Let us start by creating a simple rule; risk is inversely proportional to age. This means, if you are young, you should have more risky investments and exposure should be reduced steadily as you age.

If you are:

Below 30:
80% of investments should be invested in risky investments such as stocks and mutual funds. If possible you could also invest in real estate. The other 20% should be saved in the bank or in fixed deposits.

Between 30 to 40:
As you progress in life, it is advisable to cut down on risky investments and invest more for saving and retirement. Invest 50% of your money in risky investments, 30% in retirement schemes and 20% towards savings.

Between 40 to 50:
Now is the time to save something for your children and their education. Further reduction in risky investments is advisable. 40% of the money should be invested towards risky investments, 30 % towards retirement, 20% towards savings and the last 10% towards children’s education. This can be best achieved by investing in a bank fixed deposit or by investing in a debt based mutual fund.

Above 50:
Now is the time to start thinking about retirement. No more or very minimal risky investments are advised. Invest only when you are sure, losing money won’t hurt.

   1. Always keep a contingency fund. Never put all your earnings in to investments. Always keep a part of the money for emergencies.
   2. Start young.
   3. Invest in instruments that are inversely related. Gold and precious metals fall when the stock market rises and vice versa. Look for similar relationships before investing.
   4. Don’t invest and forget. Keep track of your investments regularly.
   5. Be ready to change investments according to prevalent conditions.
   6. Be strong willed and do not give in to rumor. Believe in yourself.

 So there you have it. Investing is not a fool’s game and has to be played to perfection. Following the simple strategies above will see you sailing the rough waters smoothly.