One has heard of the famous saying “Better be safe than sorry” .Doubling returns in short periods of time is what attracts one to the stock markets. In all this euphoria one forgets that stock markets carry risk and a massive loss in markets not only wipes out ones investment but can also be the cause of falling in debt .In all this uncertainty one wonders if it were possible to only get good returns with no risk taken ? Is this holy grail of investment possible? No, but one can surely get decent returns with very less risk and this is where a conservative portfolio comes into play .Remember it does matter how slowly you travel as long as you do not stop.
In this day of high expenses one needs to set aside funds for use in an emergency so that he does not have to sell his hard earned blue chip stocks in an emergency. One must create a contingency fund for emergency expenses in order to protect his portfolio.
Keep investing :
Never stop investing in a conservative portfolio .Keep funds aside for unique opportunities. A sudden fall in the price of blue chip stocks due to the dollar appreciating against the rupee observed last August presents a unique buying opportunity .Always be ready to spot good buying opportunities as well as have funds ready to pick them up. Remember opportunity rarely knocks twice.
Maintain size of the portfolio :
One needs to have and maintain a portfolio of decent size. One’s portfolio should have at least 15 stocks of well reputed Companies in these times of volatility .Having too many Companies in one’s portfolio makes managing the portfolio difficult.
One must never put all his eggs in one basket .Diversification basically means investing in reputed blue chip Companies across sectors.If certain sectors underperform ones returns are balanced as other sectors might over perform and balance this loss.
Invest in quality not quantity :
One must always pick up good quality stocks and accumulate them such that he has large holdings of such Companies with time and a strong portfolio. Never invest in a stock just because it is cheap. One should always do his research as penny stocks even though cheap crumble in a bear market and in some cases are never heard of again. One’s losses are massive.
One should have a certain amount of investment in cyclical or interest rate sensitives. These stocks rise meteorically in bull markets and even small allocations towards stocks of banks, automobiles and infrastructure lead to a massive gain. Defensive stocks such as pharmaceuticals and FMCG give good returns over a long period of time and hold their own in a bear market. A conservative portfolio has a large allocation towards defensive stocks.
There is a famous saying "It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for." A conservative portfolio might just be the answer to the problem.
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