So you want to create an investment portfolio but don’t know where to start? You are at the right place! Today lets read how you can build a ‘Do it Yourself’ (DIY) investment portfolio. The wide majority of us do not have adequate funds at the beginning. The key is to start with whatever you have and then build on it. Below is a ‘DIY’ investment portfolio creation strategy which everyone can use. You don’t need to be a financial expert or study stocks and markets to use the strategy.
#1 Create a savings budget and stick to saving the amount monthly
Save atleast 25% of your monthly take home salary or in hand income and park it aside.
#2 Deposit 10% of the saved amount in a normal fixed deposit
Once you have saved 10% of your annual take home salary or in hand income, create a normal fixed deposit from the saved amount. To understand this better, lets take the example of Mayur who earns Rs 50,000 every month. So his annual take home salary is Rs 600,000. 10% of the annual take home salary is Rs 60,000. Once Mayur has saved this amount, he will create a normal fixed deposit in his bank. It is important to have liquid funds at any point in time. So your investment portfolio journey should begin with ensuring adequate liquidity. This is a one time activity and as your income increases you only need to ensure your fixed deposit amount is always 10% of your annual take home salary.
#3 Invest in large cap mutual funds SIP
Continuing with the same example, Mayur continues to save Rs 10,000 per month after creating the fixed deposit. Ideally you should invest around 20% of your savings in SIP of large cap mutual funds. The rationale being, money that is saved also needs to grow. Large cap mutual funds offer stable returns while protecting your capital and tend to double your invested amount over a period of time. Mayur now invests Rs 10,000 in monthly SIP in large cap mutual funds.
#4 Invest in NPS
One definitely needs to build a retirement corpus from the start. Invest a minimum of Rs 50,000 annually in NPS in Tier I account. In addition, invest atleast 10% of your annual income in Tier II account of NPS. This will provide you tax benefits and also help to plan for retirement income. Continuing with our example, Mayur invests Rs 50,000 in Tier I account and Rs 60,000 (10% of his annual income) in Tier II account during the year.
#5 Invest in ELSS mutual funds
ELSS mutual funds allow your money to grow while also providing you tax benefits. It is one of the best tax saving instruments with a minimal lock in period. These are a good option for saving tax and also diversifying your investments. ELSS are a better option than PPF when it comes to growing your saved money over time.
#6 Investing in Gold ETF
Gold ETF’s can be used to diversify your investments. You get the advantage of investing in gold while not holding physical gold. You also end up accumulating an amount equivalent to the gold price. You can use this to buy actual physical gold whenever you need to in the future.
Your savings and your investment portfolio needs to increase in proportion to the increase in your income. So lets say Mayur changes his job next year and starts earning Rs 12 lakhs as annual take home salary. In this case his investments should increase in proportion to the increase in annual salary. It is important to invest the increment salary into investments to create wealth.
Also wealth creation is a lifelong process. You need to keep investing and remain invested irrespective of the economic conditions, market volatility and other uncertainties. Stay disciplined and focussed in your investment journey and you will reach your milestone sooner than you had thought.
