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How to Design a Conservative Investment Portfolio?





Conservative Investment Portfolio: We would hear this term generally from a financial consultant on an investment advisor. He would say, if you are around 50 years of age or below, you have enough time for your retirement. Hence, you, as investor, can take a lot of risk and gamble on high return investments. If you are, however, approaching your retirement age, you don’t have high risk taking ability. Hence, they would suggest you to have a conservative investment portfolio.

To understand how a conservative investment portfolio looks like, let’s first have a look at asset allocation. Asset allocation means distributing your total investment amount in various assets depending on how much risk can you take. It is generally suggested you must have a diversified portfolio. Some of the products you can invest in are:

  • Stock Market
  • Bonds
  • Derivatives
  • Precious Metals
  • Real Estate
  • Retirement Accounts
  • Mutual Funds
  • ETF’s
  • Savings Account

And there are many other such investment products available for an investor. The conservativeness of a portfolio depends on the percentage of funds invested in these categories.

So, when can an investment be termed as conservative? How to develop a conservative investment portfolio?
Answer to this question is very versatile, and it varies from person to person as ‘having a conservative investment’ doesn’t mean same for everyone. However, let us keep it simple and have a very generalized way to have a conservative investment portfolio. Here is how to have it.

Amongst the ones mentioned above, having more amount in few investments means having a conservative portfolio. Stocks are bit volatile. Mutual Funds, bonds, and ETF’s, however, are comparatively secure. Real estate, if bought in a developing area, can derive remarkable benefits in long run. Precious metal especially gold is considered to be an insurance against inflation and economic crisis. It gives good returns over time. Savings account doesn’t have risk at all, unless the bank winds up. Derivatives is one of the riskiest investments.

Hence, if you intend to have a conservative investment portfolio, you must have more number of safer products in your portfolio than the riskier ones. However, having all or most of them is probably the best way to have a good portfolio.

Conservative investment portfolio doesn’t mean eliminating risky investments. It only means having lesser amount invested in such products.

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