As an individual, our investment revolves around Products driven where we jump into investing in any new products in the market. Like new stocks, a new mutual fund, a new token and other things. We individuals do the same mistake over and over again by buying products like endowment policies, Ulips, ELSS fund and others.
This product is either came from a word of mouth or just doing chit-chatting in the office, that if my friend is doing let us do too. The biggest mistake we individuals do when choosing our investment portfolio is chasing the products - for tax savings, tax-free gains, better returns and instead, we should be focusing more on a process-driven approach.
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In the process-driven approach, we list the goals and tagged the investments to them. So whenever we have to invest we invest in that goals and not for the product. This will surely give peace of mind because your investment is attached to the goal and your only investment strategy is to complete that goal by investing a fixed amount every month.
For example, if we have to work towards our financial freedom goal then we have to invest that certain amount every month so that after a fixed number of years we can say that we are finally financially free. In this, we have to focus on investing in equity as much as possible because equity will help us to build that corpus that we need to attain that financial freedom. Also, we should have some debt in our portfolio so that when the market fluctuates we can take advantage of it.
So the combination of equity and debt is the way forward and the percentage you can choose whether to go with high or medium risk based on your current financial health. In my case, I am keeping 80% in equity and 20% in debt, as I have increased from last year which was 70% equity and 20% debt because now my financial health is a little better than last year and I can take that extra risk.
And also this risk is per goal basis, since both of my main goals is 10-12 years away I can take that risk, and the near term goals I have been investing in debt mutual funds and some recurring deposits as I do not want to take any risk in that area.