Once you have opened a Demat account, it is essential to diversify your investment portfolio. While investing in the long term, a diversified portfolio minimises risks. You can invest in cash, stocks, bonds, or government securities. You can diversify into global markets once you’ve gained confidence in your decisions. The following are ways to diversify your investment after you start investing but before you start you must know how to open a Demat Account.
- Asset Allocation
Stocks and bonds are two basic types of investments. Stocks are often considered high-risk with high returns, whereas bonds are usually more stable with a lower return. It is best to divide your money between these two options to minimise your exposure to risk. Age and lifestyle determine how assets are distributed. You can take a risk on your portfolio at a young age, investing in high-return stocks.
- The Qualitative Risks of the Stock
Before buying or selling a stock, apply qualitative risk analysis to minimise unpredictability. Using a qualitative risk analysis, you can assign a pre-defined rating to a project’s success. Similarly, you need to evaluate a stock based on specific parameters that indicate its stability or potential. Parameters such as the company’s business model, brand value, compliance with regulation, risk management practices, etc.
- Rebalance Your Portfolio Periodically
There is a need for balance in life as well as in investing. It is important to periodically check your investment portfolio to make sure everything is in balance. During this review, you should evaluate your goals and significant life milestones as well as where you started from and how far you have come.
A financial expert like BlinkX can help you review your investments and advise you on other options based on your lifestyle. Additionally, this exercise keeps you aware of the growth of your investment each year.
- Systematic Investment Plan (SIP)
A SIP is a great option if you want to invest a small amount over time rather than a large amount at once. This method allows you to invest a fixed amount in mutual funds regularly. A small monthly investment is ideal for those who do not have access to a large sum of money.
With as little as 500 INR, you can start a SIP. Young investors also benefit from SIPs since they instill discipline in their investment strategies. However, diversification is still the key. Invest in a variety of industries and interest formats. Furthermore, investing can be made easier with the investment app.
- Invest in Life Insurance
Life insurance is rarely considered by young adults in India. When you are young, it can be difficult to imagine death, especially if you don’t have children or other dependents. Yet, it is still wise to consider life insurance as an important investment avenue when you are young, as you are likely to be offered low premium rates by your insurance company.
You can also invest in Unit-linked insurance plans (ULIPs). This plan combines life insurance with market-linked investments. In ULIP, part of the investment amount is invested in insurance premiums and rest amount is invested in the stock market.
- Learn About Global Markets
In a short time, global markets can produce high returns. In global markets, you have to deal with multiple monetary regulations and an extremely fast-moving dynamic. So, as a young investor, it can take some time to learn how it works. However, it can be highly rewarding when the Indian market is experiencing a downturn.
Furthermore, you can start investing in an exchange-traded fund (ETF) or mutual fund with a low-cost structure and ample liquidity. This will allow you to observe and understand how the global market works while investing safely with a small amount of capital.
- Invest in Money Market Securities for Cash
Certificates of deposit (CDs), commercial papers (CPs), and Treasury bills (T-bills) are money market instruments. Easy to liquidate is the major advantage of these securities. Additionally, due to lower risk, they are safe investments. Of all the securities, T-bills are the safest. This is because they are issued by the banking regulator, the Reserve Bank of India
The best thing you can do as an investor is to diversify your investment. By spreading your money across a variety of asset classes, you can protect yourself from losses in specific areas. You can further reduce your risk by diversifying. It is possible to diversify your portfolio in a variety of ways, as mentioned above. However, you should ensure that the level of risk you take is comfortable for you.