How to Build a Strong Portfolio that Wows!

“I’ll Start When I Have More”

Speaking of hyperbolic leaps, have you ever wondered how much you actually need to start investing? It could be as little as INR 5000 each month. And yes, every month! Just as you distributed the cost of that new iPhone over easy monthly instalments, you can apply the same principle to investing too. 

Plus, you actually earn instead of losing more in interest. Investing too much, on the other hand, is also a reality for some people. The fear of being broke after retirement can drive you into a corner, driving you into an almost-paranoia of saving and investing all expendable income to the last paisa. So, the question that you should be asking yourself is, “How do I start a portfolio?”
First of all, take a deep breath. Then, start putting in some amount each month into an emergency corpus for unforeseen eventualities and then allocate your assets to start with your portfolio building

“I’ll Buy It On EMI”

The prospect of being able to upgrade your lifestyle at a fraction of the cost is tempting, but paying back slowly is an expensive affair. An even bigger folly we commit is to think our credit card shields our bank account.

If you’re going to end up not having enough in your savings account to pay off your credit card, there are two situations that could ensue:

The credit card company comes knocking at your door and threatens to penalise and even sue you.

You pay off one credit card charge with another credit card.

Guess where that will take you- hinder your portfolio building!

One lesson on how to build my portfolio is to start covering the distance on your debt by stacking the highest interest loan at the top, and paying them off. In the order of priority, if you’ve borrowed student loans, then those come first. Credit Cards are a close second. An automobile loan should be cleared quickly too, and only then should you start considering buying a home. Buying a home at different stages in life may mean different things for your financial situation, which in turn also impacts your question of “how to make a portfolio.”

When you’re younger and not too stable in your career, the pressure of having to pay the monthly EMI on a home loan can cause a lot of stress. At the same time, you buy at a relatively lower cost to the future value of real estate, and will become debt free sooner.
Another tip on how to make a portfolio is to have established an asset for yourself. But consider this: do you have the wherewithal to spend on the costs that come with buying property? On the other hand, it may be a better idea to put off buying until your mid-career years and invest to gather a considerable corpus for a higher down-payment, therefore a better pad to come home to!

“Money Can’t Buy Me Love”

Sure, but it does buy safety and security. And that’s not such a bad thing to get on a bargain. Don’t be sucked into the promises of mansplaining insurance agents who will sell you high-premium endowment and unit linked insurance plans in the name of high returns apart from an assured amount. Compare the returns with the amount you pay as premium as well as the costs attached, and the ratio will leave you aghast.
Insurance is meant to come in handy in time of an unexpected accident to you or your precious possessions. Leave it at that. Don’t expect much more. Much like your ex-boyfriends, they will be grave disappointments. Get adequate cover for your dependents, and explore dedicated investment instruments instead in your quest to portfolio building.

“Make Me An Offer I Cannot Refuse”

Bring out the calculator because neither your bank account nor your insurance is an investment instrument. Did you know that the government assigns much higher weightage to food and food products as opposed to lifestyle expenses while calculating the year on year inflation rate?

No wonder you’re happy to think it’s just 4.97%, whereas your home itself, household expenses, electronics, furniture, and other expenses all amount to a much higher rate (~10%)! So you see, inflation is not the same as relevant inflation. To top it off, it charges you a tax on practically everything you spend on it! Taxes can’t be evaded, but they can be avoided to some extent.

Each time you consider making an investment, ask yourself these questions:

Am I saving tax?

Is the tax I’m saving greater than the return I’ll get? “I Don’t Know Where My Salary Went” “Is this impacting building my portfolio?” 

Don’t be caught unawares when it comes to your money.

Financial management is as simple as Warren Buffet’s formula:

Expenses = Income – Savings Aim to earn more always.

As a millennial woman born in a country as brimming with opportunities as India, a higher pay is waiting for your asking. The next step is then to be able to save more, and therefore have a proportionately higher expendable amount for your happy hours, weekend getaways, and the never-ending bucket list. Money management is no more the job of a specialist or gender.
Just as you ensure your kids have basic life skills – paying bills, cooking, swimming or driving, managing your own money and knowing how to build a portfolio is a life skill you must acquire. If there are other avenues of life that you explore with a high degree of confidence and awareness, why not this?

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FAQs – How To Make A Portfolio

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