5 Things You Can Do to Bring Variety to Your Financial Portfolio

24-June-2021 |

By bringing variety to your portfolio, you are diversifying your risks. However, equities, debts funds and mutual funds are not the only way to bring diversity to your portfolio. You can also subscribe to a ULIP plan to spread out investment. You should also know that some life insurance policies also offer lucrative returns and maturity benefits along with the usual coverage.

Why is variety in a financial portfolio necessary?

The strategy of blending different investment products under a single portfolio is known as diversification. Having a variety of instruments in your portfolio allows you to earn higher consolidated returns. It also lowers the risk significantly. During the initial stages of diversification, you will have to focus on financial portfolio analysis.

5 tips to bring variety and maximize the returns for your financial portfolio

  • Include a ULIP in your portfolio

A ULIP plan or Unit Linked Insurance Plan funnels the premium toward the policy into two segments. One part of the premium is used to provide you with general life coverage, while the other part of the premium is invested in the markets. Because of its 2-in-1 offering, the ULIP plans are one of the popular life insurance-cum-investment avenues in India.

You can choose from equity (high-risk funds), debt (low-risk funds), balanced funds (medium risk funds) and so on, based on your specific risk profile. If you choose a managed ULIP policy, the premium is carefully invested in an equity-debt mix portfolio by finance professionals. Therefore, your money is well-diversified and protected against the swings of the market.

The ULIP plan also offers you tax* benefits under Section 80C. The maturity benefits are also *tax-free if the policy was bought before 1st February 2021, and the total premium paid does not exceed Rs 2.5 lakhs. 

Pushing the boundaries of investments

The investment opportunities are not only limited to debt, funds, and equities. If you want true diversification, you will have to go beyond and invest in other instruments. Government bonds provide good investment opportunities. Real estate is still one of the leading investment choices in our country. There are some life insurance policies that offer lucrative returns and offer bonus2 on the maturity amounts.

One of the newest investment opportunities comes in the form of cryptocurrency. However, crypto investments are very volatile and can provide massive gains and losses within a span of a few days. The rules for trading and gains from crypto investments have also not been properly outlined by the government. Therefore, if you are not aware of the nature of the crypto investment, it is better that you stay away from this. 

  • Mutual funds and Indices

Investing in mutual funds and indices is one of the easiest ways to bring diversity into your debt and equity mix portfolios. Indices, also known as index funds, are indicators of the strength of the market. An Index fund ensures that your money is well invested across all the sectors. It also makes the financial portfolio management part comparatively easier.

Unlike index funds, mutual funds are actively managed funds. This means that a fund manager constantly tweaks the portfolio to provide you with the best return possible. Therefore, mutual funds charge a small fee to manage your funds. Mutual funds and index funds also allow you to easily withdraw your money.

  • Going beyond the geographical boundaries

The age of globalisation allows you to even invest in stocks trading in different countries. You achieve this by investing in global mutual funds or directly invest in equities through dedicated apps. There are multiple funds that focus on different geographies. Investing abroad also provides you with a significant variety. If you think that it is too risky to invest in an emerging economy, then you can choose to invest in a developed country. Global investment diversification allows you to invest in the best performing sectors of the respective countries. For example, you can invest in the IT sector of the USA.

  • Don’t over diversify

Diversification does not mean having over 100 different types of equity stocks in your portfolio. Diversification means bringing variety into your financial portfolio through different asset-classes. 

Tata AIA Life Insurance Savings Solutions

If you are afraid of losing your money in the stock markets and want to invest in a simpler investment avenue, then the varied and customizable Savings Solutions by Tata AIA are for you.

 
These insurance-cum-savings plans offer guaranteed1 income after the end of the premium payment term. The plans also provide bonuses2 on the maturity of the policy. One can even enhance the protection and coverage by opting for add-on riders #

To secure the future of your close one, the policy offers life insurance as well. You can find more about the various life insurance policies of Tata AIA on their official website.

Summing Up

There are only a few things that you have to remember, and you will be ready to start investing. You should never invest all your money in a single stock, regardless of the upside potential of the stock. Maintaining the debt and equity mix of the portfolio is also important. Lastly, you should regularly do a financial portfolio analysis to make minor tweaks to your investing style. By following the earlier mentioned steps religiously, you will be able to make a decent earning from your portfolio.

L&C/Advt/2021/Jun/1008

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Disclaimer
  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and they will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication; however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility for tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry

  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders, please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.
  • 2These bonuses are not guaranteed in nature. The Company may declare a Cash Bonus rate annually in advance. The Cash Bonuses, if declared, will be applicable provided all due premiums have been paid.

  • IN THIS POLICY, THE INVESTMENT RISK IN THE INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICYHOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

  • Past performance is not indicative of future performance.

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  • Please make your own independent decision after consulting your financial or other professional advisors.