Your investment portfolio should have different asset classes like equity, bonds, gold, etc. Depending on your risk profile and risk capacity, you should allocate a percent in the different asset classes. If you are in your 20s or even early 30s, you can invest a significant portion into direct equity and equity-related instruments on your own or through portfolio advisory services.
When you plan your vacation to a new place, you first check the details of the location, different hotels and their quality, transportation options, places to visit, and so on before buying the tickets, right? You never book tickets and then start exploring. You can do that also, but then your journey may have some hiccups. If your financial journey is not smooth, you can think of going with equity advisory services.
When you plan your vacation to a new place, you first check the details of the location, different hotels and their quality, transportation options, places to visit, and so on before buying the tickets, right? You never book tickets and then start exploring. You can do that also, but then your journey may have some hiccups.
The first thing you need to know before you start investing is your risk profile (Download our app to find yours). At a high level, the risk profile is of three types –
- Conservative – You don’t want to take a risk.
- Moderate – You can take the medium risk to get good returns.
- Aggressive – You are ready to take a high risk to get high returns.
Next, there are three categories in equity, and to create a good portfolio, you need to have allocation in all.
Large Cap companies – Large-cap companies are those which have a market cap of Rs 20,000 crore or more. These are large and well-established companies that have reliable management. The volatility or risk of investing in these companies is the least. Hence, they are stable investment options. At the same time, the growth potential is limited compared to other categories.
Mid-cap companies – These are companies whose market cap is between Rs 5000 and 20000 crore. These are slightly more volatile than large-cap and hence riskier. However, the growth potential is good in these companies.
Small-cap companies – The market cap of a small-cap is less than Rs 5000 crore. These are highly volatile as their prices swing considerably. It increases the risk for you as an investor. The highest growth potential lies with small-cap stocks.
Now that you know different risk profiles and categories of stocks, you have to invest in them according to your risk profile. If you want to create a portfolio only with equity, you should be very careful in investing in different categories.
Many investors think if they are conservative investors, they should not invest anything in small and mid-cap. Ideally, you should, though the allocation will be limited. But if you do not know how to pick small and mid-cap stocks, you should avoid investing in them.
Now, coming to the most important part of this discussion – how much percent to allocate in different categories. The answer is not straightforward – it depends on a lot of factors. It depends on current market conditions, your investment horizon, etc. However, at a high level, we can talk about how your equity portfolio should look based on your risk profile –
Conservative– You will have a high percent in large-cap stocks and limited exposure in small and mid-cap companies.
Moderate– Here, you will have significant allocation in large and mid-cap companies and small percent in small-cap companies.
Aggressive– You can evenly invest in all three categories. Which category will have what percent allocation will depend on many other factors.
At the start, we took the example of planning a vacation. There is another option you have while planning a vacation. If you do not want to do all the research and planning – either because you do not have the time or do not know how to do it (because of lack of resources), you can take help from the travel agent. He does everything for you. He will create a perfect itinerary for you. Once you go through a travel agent, you just relax and enjoy your journey without any worry.
Coming back to investing, as an investor, you will have to pick companies from each category and invest in them. We understand, if you are new to investing, picking up small and mid-cap companies will not be easy for you. Most investors are not able to pick good small and mid-cap companies.
For everyone looking for equity advisory services, we have created Jarvis. It takes care of everything we have discussed above. It makes your investment journey smooth. It evaluates your risk profile and depending on your investment horizon, present market condition, and other factors creates an equity portfolio for you.
You must be wondering, how can an app do so much? It is not any ordinary app. It is an AI-driven app and removes the emotional aspect of investments. Hence it gives you excellent returns.
The decision of planning your vacation is totally on you – will you do the planning yourself, or do you want to go through a travel agent?
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