Portfolio Management For Beginners

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By Sananda Chakrabarty

Portfolio Management For Beginners

“ Money speaks only one language : IF YOU SAVE ME TODAY, I WILL SAVE YOU TOMORROW.”

This has always been the motto spoken by sensible members of society. Unfortunately, a few of us do not realize it unless it is too late and we are neck deep in debt we struggle to pay off. I apologize if that sounded grim. I promise that it only gets better from here. My personal experience says it is never too late to start investing for your future. This article is dedicated to bring to light portfolio management for beginners.

In simple terms, investment is assigning or allocating funds or assets in a way that it ensures a future positive rate of return. As a beginner, there are a few routes of investment that you can choose from. Let me jot down a few pointers here.

What Financial Instruments To Choose From ?

Portfolio management for beginners can only be understood if an investor is fully aware of the financial instruments which he can choose from. I have listed a few of the instruments which investors can use to help build a secure future.

  1. Direct Equity refers to when you invest in equity shares of a company. In other words when you buy a share of the ownership of the company. It is a high risk option with an expectation of higher returns.
  2. Equity Mutual Funds are actively and passively managed and are primarily directed towards investments in stocks. These are low to high risk investments with market linked returns. Mirae Asset Emerging Bluechip Fund and SBI Small Cap Fund are examples of Equity Mutual Funds.
  3. Debt Mutual Fund are suitable for investors who are not keen risk takers and are in the lookout for a steady income as these funds are the ones that are invested in Corporate bonds, debt securities, Government bonds etc. and are also referred to as Fixed Income Bonds. They have a low cost structure, they are relatively less prone to risks. Aditya Birla Sun Life Corporate Bond Fund Regular Plan Growth with 8.89% 3-years returns and HDFC Corporate Bond Growth with 8.77% 3-years returns are examples of Debt Mutual Funds.
  4. Fixed Deposits are the deposits which have fixed returns and are provided by banks. These deposits have a specific tenure and investors get a higher rate of return than regular savings. The rates provided by various banks on different FD schemes are different.
  5. Real Estate or property investment generates benefits in the form of rentals or capital appreciation. It is a medium risk investment with 19 – 15 % returns generally obtained.
  6. National Pension Scheme is a retirement planning scheme which can be withdrawn at maturity with total tax exemption on the matured amount. It is a low to high-risk investment. The returns are market linked but are generally between 8 – 10 %.
  7. Public Provident Fund is a long-term investment type which is favored by individuals seeking high and stable returns. It generally offers around 7.9% returns.
  8. Senior Citizen Savings Scheme is an appropriate choice of investment for individuals who are above the age of 60. It offers a steady flow of high income with the best tax saving benefits. It offers a return of 8.7%.
  9. Gold ETF is the investment in gold which has its own merits. Jewelry involves making charges and other hidden costs but investing in gold coins has better benefits and these certified coins are now available in most banks. It is a low-medium risk investment and the returns are market-linked.

How To Choose The Right Product ?

The big step for portfolio management for beginners would involve a set of processes and choices to be made to actually choose the right instrument. Judging by my personal experiments and research, I would suggest a methodic approach to investing. As no two humans are alike, similarly, our investments cannot exactly replicate that of our friends. We need to follow a few steps to make sure we are allocating our funds where we have the potential of getting the best benefits as per our requirements. Having said that, I will again guide you through some steps, which will help figure achievement of optimum returns while implementing portfolio management for beginners.

This will give investors the right direction to achieve from the investments and in turn it will help them invest in the right product.

Systematic Planning


I would first suggest you plan your goals. This involves a thorough thought evoking method where you answer questions like “Why do I want to save?” Answers to questions might range from “ saving for retirement or saving for your child’s future education or buying property”.

Other questions which might govern your decision should include “ Do I want to invest long term or do I want the funds available after a short period of time?”  If you would need these funds to be available in a shorter period of time, you will invest in funds with a shorter tenure. Based on the answers to these questions, you can get a step closer to making the right decision. 

The Quantum Of Risk

One important factor affecting investing decisions is the willingness to take risks. A person with more funds to spare and less limits imposed on time might be more prone to make riskier investments. You are best judge to decide what is the level of risk you are willing to undertake. Most times than not, the riskier the investment, the better the benefits. Various websites like Money Control  or Value Research Online provide the details on various schemes and conduct a comprehensive comparison between them thus giving the investor a good idea of the risks involved with each investment scheme.

Extensive Research Of The Markets

You should research the investment market before investing. There are various financial metrics that need to be checked before investing. These include the types of stocks, their reselling value and the tenure of investments. A good grasp over the details of the market will help you assess the different risks involved and thus you will decide precisely. With a thorough understanding of the economy and the markets you be in a better position to think analytically. Investing individuals are often guided by their own diffidence brought about by market changes in investment prices. Hence, instead of being governed by the heart, an individual needs to be governed by their brain which can only be possible if they have a detailed knowledge of the working of the market.

Portfolio Diversification

Practicing diversification of funds allocation on different investment schemes will allow you to better manage your risks and make up for any losses from one type of investment through the profits from the others. As for example, distributing the funds between shares, cash, property and FDs can be considered diversification.

Curb Your Debts

Finally, it will be considered wise to restrict yourself from borrowing from banks or any NBFCs to further invest. In cases of appreciation of the investment funds, it might look beneficial, however in cases of unsuspected losses, it will make you lose more money not only on the principal amount invested but also on the interest to be paid on the borrowed sum.

Concluding Remarks

Portfolio Management for beginners can be quite daunting so there is an option to first start with professional portfolio managers who can assist you with choosing and diversifying funds into different investment buckets to make sure you get the best benefits and the highest returns. They are experienced field players who assess your availability of funds and risks taking before guiding you through investment procedures. Motilal Oswal PMS, Kotak PMS, ICICI Prudential PMS are a few of the top Profile Management Services in India that have successfully guided individuals through various investment instruments.

Warren Buffet, the famous American investor, quoted “ Never depend on a single income. Make Investment to create a second source.” In today’s world, with rising expenses and uncertainties, at the throes of the pandemic, this quote is apt for one and all. “Money is always eager and ready to work for anyone who is ready to employ it.” Readers, please be wise while employing your own money and let us all hope to invest wisely to build a secure future.

This article is authored by Sananda Chakrabarty. She is an active blogger and writes about topics such as financial planning, investments and wealth management.

If you found this article interesting you could read the article – 7 Reasons Why Mutual Funds Are The Best Investment Option.


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