How to Build Your Wealth Management Portfolio

Have you ever wondered what would be the best way to build up a solid wealth management portfolio. Then reading further might be your first step towards making it a reality.

When it comes to wealth management, it's hard to overlook the importance of a solid foundation.  If you are planning to raise a multistoried structure that you want to outlive a few generations, then you need to ensure that the foundation on which you build your dreams is strong enough to shoulder your empire against all unexpected calamities. Building our wealth management portfolio is no different than this. It should be able to withstand the economic uncertainties influenced by the volatility in domestic & international stock market, global economic slowdown & recession.

Now that we know the importance of a strong foundation for a long-standing wealth portfolio, you have already started to wonder how to achieve it. So, what is the best investment plan? Unfortunately, there is no one stop solution for all your investment needs. But, you can have one customized with a perfect balance of the available investment opportunities.

PYRAMID:

The pyramids of Egypt are known for their unique structure and their longevity. These ancient architectures stand strong for more than 4000 years now. Of course, they did not achieve this easily. A lot of time and effort were involved before they finally reached the pyramid structure – The shape of the pyramid is one of the most vital reasons for its ability to preserve the mummies for such long periods.  

You can build a reliable investment portfolio that will transfer your wealth to the next generations if you design it like a pyramid. A structure that we can call - A Financial Pyramid.

 Financial Pyramid:

Let us see the five layers of the financial pyramid. While, we do not want to address the products per say, we will however, cover the concepts to be followed.

Financial Pyramid constructed Bottom up. As we know, the ground rule for a healthier building, a strong foundation is the key. As the bottom most layer of the financial pyramid is the base on which your financial empire is built, it is of vital importance to lay a super strong foundation. This can be achieved by protecting your investment source.

PROTECTION - We need to first protect our future income, how do we do that, by taking proper Life, Health, Accidental & Disability insurance cover. The three most popular global methods to identify the appropriate insurance cover are as follows:

• Human Life Value
• Capital Need Analysis
• Net worth method

We will look into each of these in detail in our next article.

The next layer in the financial pyramid is RISK FREE GROWTH, After taking adequate insurance cover, As the saying comes from the "Richest man in the Babylon", Thus it is wise that we must first secure small amounts and learn to protect them before the GOD and entrust us with LARGER. Everyone is tempted by opportunities where we can make huge profits by investing. Our friends and relatives are eagerly investing and urge us to take the same path as theirs. The first principle on investing is Capital Security. The penalty of risk is probable LOSS. The following are some of the prominent risk-free growth investment opportunities available in India.

·         Bank Fixed Deposit & Recurring Deposit

·         Public Provident Fund

·         Post Office Savings

·         Endowment type life insurance policies

·         Govt of India Bonds        

The third layer of the Financial Pyramid is Growth Risk which is of medium risk. I have listed below a few investment opportunities that will get you a decent return of over 10% - 12%  with lower probability of a loss.                                                                                                                                                                         

• Mutual Funds
• ULIPS

 The Fourth Layer of the Pyramid is High Growth which is High Risk and it comprises of the below mentioned asset class

• Shares
• Real Estate
• Art
• Private Equity Funding

The top layer of the Financial Pyramid is Speculation As the name indicates, it is a super risk asset class which offers tremendous potential for profit and loss equally. The following are a few investments to name in this category:

• Futures & Options
• Commodities
• Forex

 As we are now familiar with the financial pyramid structure and the various products associated with it, here is an overview of the risk and return distribution of various product in the financial pyramid structure .

 

With that concludes the layers of the Financial pyramid. You can achieve a healthier financial portfolio that can save you from global and domestic financial instability as you master these concepts.

We will meet again with another useful financial subject soon. You can also let us know about any specific area of finance that you would like to get familiar with so that we can assist you further.