Portfolio

Investments

Portfolio is the complete collection of all financial investments -- equity, debt, gold, real estate, cash. Portfolio management balances risk and return aligned with goals and time horizon.

In detail

Diversification reduces volatility: equity and gold are negatively correlated (gold often rises when equity falls). Rebalance annually to maintain target allocation. 5-7 mutual funds is optimal -- more creates complexity without meaningful diversification benefit.

Formula

Portfolio return = Weighted average of individual asset returns

Real-life example

🇮🇳 India example

Kavya: Nifty 50 Rs 5L (50%) + debt fund Rs 2L (20%) + PPF Rs 1.5L (15%) + gold ETF Rs 1L (10%) + liquid fund Rs 50K (5%). Weighted expected return: approximately 9.8%.

Frequently asked questions

How many mutual funds should I hold? ▼

5-7 maximum. Typical: 1 large-cap index + 1 mid-cap + 1 flexi-cap + 1 ELSS + 1 debt fund. More funds = complexity without diversification benefit.