Your portfolio-mix has to match with your financial needs and goals. A portfolio, a collection of investments, generally consists of stocks, bonds, mutual funds, bank deposits, gold, currencies, real estate, insurance and other assets. Your investment portfolio needs to make adequate provision for a decent living for your family, good education to your children, owning a house, a car, comfortable relaxed living after retirement, medical emergencies and all other financial needs.

List out all your financial needs with estimates how much money would you need and when would you need it.  You will notice these are drastically different compared to your friends’. The cash in-flows required and their timings for you are different than that of your friends and others. You need to build up your customized portfolio that meets your own financial goals. You cannot copy it from your neighbors. It has to be unique to your personal situation.

Your portfolio should be based on your age, earnings, financial needs, risk tolerance capacity and many other factors. The financial goals do also change with the passage of time. For example, when you are young, you need insurance policy that provides financial protection to your family in the event of unfortunate demise. On the other hand, after retirement you need annuity or pension which at least meets minimum monthly needs of yours and your spouse.  The portfolio has to be flexible to match with the investor’s changing financial needs. This has to be planned in an organized way.

Savings is the first step towards building up your portfolio to achieve your financial goals. Start savings early. You have alternative options to invest in different assets classes. But remember all investments carry different risks and rewards profile. So you need an investing strategy that depends on the risk you want to take and the return you expect. You have to build up a portfolio with an optimal mix of different assets classes. But the basic questions are what this optimal mix is for you and what should be your investing strategy to build up the same.

Knowledge about the assets in your portfolio is necessary to be a successful investor. As warned by great investors such as Warren Buffet and Fisher, buying a company or any asset without having sufficient knowledge of it may be dangerous. So before deciding on your portfolio, develop an understanding of the broad types of portfolio as listed below:

Aggressive Portfolio: Investors who are looking for higher returns and have the ability to take higher risks can have an aggressive investment strategy. Their portfolios generally have a higher equity composition. They even prefer volatile stocks to make short term profits. High net worth individuals invest in private equity and hedge fund also.

 
Conservative Portfolio: This strategy aims at steady and safe return. Equity forms a small portion of the mix and consists of defensive shares. Their investments are more in fixed income securities like fixed deposits, bonds, and gold and cash equivalents. As these investments provide an assured return on due dates as per schedule, you can plan your cash inflows for meeting some regular expenses. This portfolio is more suitable for elders.

Moderate Portfolio: It is suitable to investors with a longer tenure and an average risk tolerance. Younger people may invest in value and growth shares with a long term outlook. Fixed-income securities such as bonds or, fixed deposits pay you a fixed rate of return that may be used to meet some recurring expenses such as school fees. 

In short, you need a clear vision of a portfolio that is most suitable for you. Develop a customized portfolio most appropriate for you. Frame your own investing strategies consistent with your age, financial needs and risk appetite. Always remember that the customized portfolio is the way to go because you know yourself best.