A perfect investment portfolio may not be ideal for everyone. While the equity market has the potential for attractive long-term returns, it also brings with it a level of volatility that can be unsettling. It's essential not to be swayed by short-term performance fluctuations. This doesn't mean you should always play it safe; it's about taking calculated risks that align with your goals and risk tolerance.
The key features of a perfect investment portfolio should include the following:
Understandability: A perfect investment portfolio is one that is easy to comprehend. If you don't understand how the products in your portfolio work, how can you be sure they are perfect for you? Excuses like "a relative sold it to me" or "I helped a friend reach their target" or "an expert mentioned it on CNBC" should not be your rationale. It's your money, and you should have a clear understanding of where you are investing it.
Manageability and Flexibility: A perfect investment portfolio should be flexible and easily manageable. It should allow you to enter and exit investments smoothly, with the ability to shift between products and asset classes as needed. Your entire portfolio should be visible on a single page, avoiding fragmentation across different products that are exposed to the same asset class. You should be able to determine the current value of your portfolio within minutes. A perfect investment portfolio should provide you with peace of mind.
Purposeful Investment: Every product in your portfolio should have a clear purpose or reason for being there. In other words, each investment should be aligned with a specific financial goal. Understanding how these products work is essential, but you should also grasp their role in your overall portfolio.
Diversification and Proper Allocation: Your portfolio should be diversified across various asset classes, such as equities, debt, gold, real estate, etc., in line with your risk tolerance and targeted goals. It should also feature proper diversification within sectors, countries, and between short and long-term securities. A perfect investment portfolio should not be driven solely by the pursuit of returns but should follow a well-defined process to achieve specific objectives.
Tax Efficiency and Cost Awareness: A perfect investment portfolio ensures that returns are not eroded by unnecessary taxes or costs. Before investing in any product, you should be aware of the associated costs and the tax implications of the returns. For example, insurance endowment plans may offer tax-free returns but often come with hidden expenses that reduce overall returns. Similarly, real estate investments have various associated costs and may be subject to taxation. Overloading your portfolio with real estate or investment-linked insurance products may not be conducive to your overall financial well-being.
Once you understand your requirements you will easily be able to filter down a suitable portfolio for yourself.
Currently, Wright Research offers portfolios in the following categories:
Are tactical portfolios where we allocate to the best performing factor or asset class in the market based on our market regime forecast. These are low-risk, consistently compounding portfolios focusing on a specific risk profile.
Here, we create portfolios that follow particular themes or market factors. Examples of some elements we work on are - momentum, quality innovation, etc.
We create baskets of mutual funds suitable for a particular investor risk profile. These baskets are ideal for investors who only want to invest in MFs.
These portfolios are only for advanced investors. Here we offer long/short equity portfolios and medium frequency options algo strategies.
Most of the products offered by us are LONG-TERM, so invest only if you have a longer-term horizon. If you are looking for short-term (3-6 month) goals, invest in liquid, low-duration debt funds.
These are the broad investor definitions and the products we recommend for them:
If you fall into the aggressive investor category, the suitable portfolios for you will be:
If you fall into the moderate investor category, the suitable portfolios for you will be:
If you fall into the conservative investor category, the suitable portfolios for you will be:
If you fall into the advanced investor category, the suitable portfolios for you will be:
Wright Research believes in research backed, data-driven quantitative investment strategies. We choose the right asset mix for your risk profile across market conditions, and add incremental alpha using dynamic allocation to equity factor models. Our investment philosophy is as follows:
Factor Investing - We explain the market movement using quantitative equity factor models
Regime Modeling - Markets do not stay the same. Our regime models forecast the market cycle
Momentum Investing - Momentum is the strongest factor in India and an important part of our philosophy
Risk Modeling - Risk Management is at the core of our investing. A multi-level approach relying on AI driven forecasts to anticipate market movements, diversifying the portfolio towards low volatility & deallocation policy in extreme scenarios. Frequent portfolio reviews & monthly rebalance minimise risk exposure
Asset Allocation - We choose the best mix of investment assets for any market condition
Artificial Intelligence - We use machine learning models to forecast risk and reward in the market
One of the underlying principles of our investment philosophy is that the markets do not always stay the same. Financial markets can change their behaviour abruptly. The behaviour of stock prices from one period to the next can be drastically different. This shift in financial markets is usually triggered by fundamental changes in macroeconomic variables, policies, or regulations.
Wright Research follows a holistic approach to risk management using the following tools to handle risk:
Regime Modeling based Dynamic Adaptiveness - The core of our ethos contains a regime model that uses Artificial Intelligence to forecast the next month in the market.
Asset Allocation or Diversification - We change our asset allocation to make sense of the volatility and switch to safer havens of bonds and gold ETFs.
Deallocation in extreme events - We also have a deallocation policy that helps us switch to cash when the markets are precarious.
Wright Research smallcases & portfolios are reviewed weekly by the Investment Advisor & the Investment Team. This is to ensure stocks allocated to the portfolio are aligned with AI & quantitative models, and the team monitors significant market factors such as volatility, momentum & others along with sudden news announcements or macro economy level changes to ensure the performance of Wright Research smallcase & portfolios is optimized.
These frequent portfolio reviews conducted by Wright Research provide significant inputs into the monthly rebalancing strategy. This way the Wright Research smallcases & portfoliosremain well-balanced, up-to-date investment mix with low portfolio churn, which reduces unnecessary transaction costs providing higher return potential.
In situations, where there are adverse market conditions or negative stock-specific developments, frequent portfolio reviews enable the Investment Advisor & the Investment Team to react quickly, limiting risk exposure to such negative events. Rebalances in such rare scenarios are sent out immediately to protect our subscribers from a negative fallout.
We believe a successful investment strategy needs to be adaptive and should shift its participation behaviour as the market shifts its regimes. We use a predictive machine learning model that uses fast-moving macroeconomic variables in combination with technical indicators over the index to predict future risk in the market. We have seen our predictive model be highly accurate, and we dynamically adapt our participation in various strategies based on this model.
Why is choosing the right investment portfolio important?
Choosing the right investment portfolio is crucial because it directly impacts your ability to achieve your financial goals. The composition of your portfolio influences your returns, risk exposure, and the likelihood of meeting objectives like retirement, education funding, or wealth accumulation. An appropriate portfolio aligns with your financial goals, risk tolerance, and time horizon, ultimately helping you grow your wealth while managing risk effectively.
How do I identify my financial goals before choosing a portfolio?
Identifying your financial goals is a critical step before selecting a portfolio. Start by defining specific objectives, such as retirement at a certain age, buying a house, funding education, or building an emergency fund. Assign a timeline and cost to each goal. Understanding the timing and financial requirements of your goals will guide your portfolio selection, helping you determine the right mix of assets and strategies.
What role does risk tolerance play in portfolio selection?
Risk tolerance is a key factor in portfolio selection. It reflects your willingness and ability to withstand fluctuations in the value of your investments. A higher risk tolerance often leads to a portfolio with a greater allocation to equities and potentially higher growth but also higher volatility. Conversely, a lower risk tolerance may result in a more conservative portfolio with a greater focus on capital preservation. Your risk tolerance should align with your financial goals and emotional comfort level with market volatility.
Should I focus on active or passive investing in my portfolio?
The choice between active and passive investing depends on your investment philosophy, goals, and preferences. Active investing involves actively selecting and managing individual securities or funds with the aim of outperforming the market. Passive investing, on the other hand, typically involves investing in index funds or exchange-traded funds (ETFs) that aim to replicate market benchmarks. Passive investing often comes with lower costs and can be a suitable choice for investors seeking broad market exposure with minimal effort. Active investing may be preferred by those who believe in the potential for superior returns through skilled management but often comes with higher fees.
Can I seek professional help when choosing an investment portfolio?
Yes, seeking professional help is a prudent approach when choosing an investment portfolio, especially if you're unsure about the process or lack the time and expertise to manage your investments effectively. Financial advisors, wealth managers, and investment professionals can assess your financial situation, goals, risk tolerance, and time horizon to recommend a suitable portfolio strategy. They can provide personalized guidance, construct portfolios, and offer ongoing monitoring and adjustments to keep your investments on track. Professional advice can be particularly valuable for complex financial situations or when you need a tailored investment strategy.
Learn how we choose the right asset mix for your risk profile across all market conditions.
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