The ultimate synergy existing between an investor and investment is to make financial profit, defining the main aim of undertaking an investment. The idea of investment is analogy to the concepts of risk and return, as an investment is always discussed in terms of the returns, profits, it yields, and risks, the probability of loss associated with it. There are different types of investors; risk lover, an investor who has high potential to engage in a risky investment, risk neutrals, an investor who is indifferent between a risky and a non risky or less risky investment, and risk averse, an investor preferring lower returns with known risks.
Hence, it will not be wrong to say that every investor has a varying risk taking capacity. There are a large proportion of investors that are harassed by the name of stock market and the fundamental of potential risk associated with it. Howbeit, a well designed stock portfolio can result in generating humongous profits in comparison to other investments. All you need to know the time of designing a stable, yet profitable portfolio. Following are the three important steps towards designing your perfect stock portfolio.
Step 1: Ascertain Your Investment Bucket
Your first step towards designing a profitable stock portfolio starts with a reality check. The investor needs to know what his probable assets are. It will help you to develop a trade off between possible risks and rewards. An assessment of the investment bucket will help in deciding the goal of the investor, the extent to engage in riskier stakes and the time period for which he wishes to hold his portfolio basket. Following are the few important points to be considered under this head:
- the probable age bracket of the investor
- what the investor expects in terms of the long term and short term growth prospects of his investment
- the available capital pitcher
- analysis of future capital needs
- a list of other monetary and non monetary resources