Identify your real purpose of investment. Determine whether you’re investing for retirement, wealth accumulation, education, or something else. Your goal will influence your investment strategy.
Understand how much volatility you can handle. Are you comfortable with potentially higher returns but also higher risks, or do you prefer lower-risk investments with more stable returns?
Consider how long you can stay invested before needing the funds. Longer time horizons generally allow for more aggressive investment strategies.
You can invest in stocks, bonds, real estate, mutual funds, ETFs, etc. as per your risk appetite and investment horizon.
Cost of fees and expenses vary for each asset category. Asset management companies charge a fee for managing your funds. Investing through a broker involves some fees and expenses with the merit of personalized service.
Past performance gives an idea of the performance of the fund, doesn’t guarantee similar results in future. Look for consistency and how the investment performed during different market conditions.
There is a team of dedicated fund managers helped by a big research team, who manage the investments. Expertise of the fund manager influences the outcome of the investment strategies in delivering consistent returns over various market cycles. Trustworthy and competent management can significantly impact investment success.
It is important to understand how taxes will affect your investment returns for different asset categories. Consult your broker or tax consultant for proper guidance.
Liquidity is an important criterion while choosing asset classes.While some investments are highly liquid, others may have exit clauses for premature liquidation. Consult your broker before deciding the asset category.
As the saying goes, “never put all eggs in one basket.” Spreading your investments across different asset classes reduces risk by mitigating the impact of market fluctuations on your overall portfolio and optimizing returns.