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A Step by step guide to Investment process.

There are broadly 5 steps to an investment process that help in selecting and investing in the best asset class according to your needs and preferences. We will take you through all of them.

The First Step is to Determine your Investment Objective and Risk profile:. Before you start building a portfolio, you need to assess the following three major factors: Financial Goal; Capital Outlay and Risk Appetite.

Understanding financial goals give direction to the portfolio while Capital Outlay and Risk appetite play a primary role in deciding the kind of assets we can purchase for the portfolio. This step provides a benchmark to be able to evaluate our portfolio’s performance. You need to clearly define goals and quantify it so that the assessment can identify any gaps between your current investment strategy and the stated goals. 

Building a suitable portfolio: Once you identify your objective and understand risk appetite, the next step is to start building a portfolio.

The key to successful investing is Diversification. That means investing in different types of investment options depending upon your risk-return balance.

The basic four portfolio types that you can choose from are;

  1. Aggressive portfolio– Includes assets which give high risks and rewards.
  2. Defensive portfolio – Includes assets that are least sensitive to market movements.
  3. Income portfolio– Includes assets that provide regular dividends or profit distributions to their owners.
  4. Hybrid portfolio– Includes multiple types of assets like commodities, bonds, and real estate.

It is important to choose the right type of portfolio category, consult a financial planner to assist you with this decision.

Choosing the Right Fund: Now that you know what portfolio type works best for you, choose what funds to invest in. Only the right funds will help you to imply the strategy efficiently. To choose the right fund for you, you need to explore and research the best fund for you.

Majorly assets can be categorized into two broad categories:

  1. Assets for low-risk appetite – Fixed-income Funds and Good Bond Funds.

2. Assets for high-risk appetite – Managed Portfolios and Multicap Equity Funds.

After identifying the best option, filter out the best investment option through research. There are various tools and techniques to identify the right fund. We recommend you to look at fundamental and technical analysis.

The fundamental analysis measures the underlying value of an asset by studying the prospects of the company, its industry, and the economy. On the other hand, technical analysis is concerned with using charts and indicators to predict how the price of a security will change in the future. You can use either one of these methods, or a combination of both, to carry out useful research.

Evaluating your Portfolio’s Performance: Once the plan is implemented, the management and managing process begins. A continuous monitoring and measuring the portfolio’s performance relative to the benchmark is necessary to make your money work efficiently for you. This is the most important step in the Investment Process. determines if the allocation is still on target to track the investor’s risk-reward profile. If it is not, then the portfolio can be rebalanced, selling investments that have reached their targets, and buying investments that offer greater upside potential.

There is no apt DIY Investment Process to suit your financial objectives and risk profile, they vary from individual to individual. It is best suited if you take this financial journey under the guidance of a professional. 

Investment management is a continuous process and requires a deliberate and precise portfolio-planning. Therefore, we recommend a professional manager to help you through this journey!

Are you planning Investments? Or looking for an expert to guide you through your investment journey? We are here to help you!

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