top of page
Writer's pictureOm Prakash Singh Patel O P

New Investment Plan in 2024: What You Need to Know

The year 2024 is expected to bring new challenges and opportunities for investors who want to achieve their financial goals. Whether you are saving for retirement, education, or a dream vacation, you need to have a sound investment plan that suits your risk profile and time horizon. In this blog, we will discuss some of the best investment options to look forward to in 2024, as well as some tips on how to create a balanced and diversified portfolio.

investment in 2024

Best Investment Options in 2024

According to Forbes, some of the best investment options to look forward to in 2024 are:

  1. Direct Equity: This involves buying shares of publicly traded companies directly through a demat account and trading platform. Direct equity offers the potential for high returns, as well as dividends and voting rights. However, it also involves high risk, as the share price may fluctuate due to market conditions, company performance, and other factors. Investors who choose direct equity should have a long-term perspective and conduct thorough research and analysis of the companies they invest in.

  2. Equity Mutual Funds: This involves investing in a professionally managed portfolio of various companies, thereby indirectly participating in the stock market. Equity mutual funds offer instant diversification, reduced company-specific risk, and professional management. They also have different types and categories, based on the size, sector, and theme of the companies they invest in. Investors who choose equity mutual funds should have a medium to long-term horizon and select funds that match their risk appetite and return expectations.

  3. Real Estate: This involves investing in physical properties, such as land, buildings, or apartments, or in real estate investment trusts (REITs), which are companies that own and operate income-generating properties. Real estate offers the benefits of capital appreciation, rental income, and tax advantages. However, it also involves high initial costs, maintenance expenses, liquidity issues, and legal hassles. Investors who choose real estate should have a long-term outlook and consider the location, quality, and demand of the properties they invest in.

  4. Public Provident Fund (PPF): This involves investing in a government-backed scheme that offers a fixed interest rate and tax benefits. PPF is a safe and secure investment option, as it is backed by the sovereign guarantee of the government. It also offers compounding interest, tax deduction, and tax exemption. However, it also has a long lock-in period of 15 years, which may limit the liquidity and flexibility of the investor. Investors who choose PPF should have a long-term horizon and use it as a part of their retirement planning.

  5. Bank Fixed Deposits (FDs): This involves investing in a bank deposit that offers a fixed interest rate and a fixed maturity period. FDs are a low-risk and low-return investment option, as they are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs. 5 lakh per depositor per bank. They also offer regular income, easy accessibility, and loan facility. However, they also have low returns, tax implications, and inflation risk. Investors who choose FDs should have a short to medium-term horizon and use them as a part of their emergency fund or contingency plan.

  6. Sovereign Gold Bonds (SGBs): This involves investing in government-issued bonds that are linked to the price of gold. SGBs are a convenient and cost-effective way to invest in gold, as they eliminate the need for physical storage, purity verification, and making charges. They also offer interest income, capital gains, and tax benefits. However, they also have a long lock-in period of eight years, with an exit option after five years, which may affect the liquidity and flexibility of the investor. Investors who choose SGBs should have a long-term horizon and use them as a hedge against inflation and currency fluctuations.

  7. Debt Funds for Short-Term: This involves investing in a professionally managed portfolio of fixed-income securities, such as bonds, debentures, treasury bills, and commercial papers. Debt funds for short-term offer higher returns than bank deposits, as well as liquidity, diversification, and professional management. They also have different types and categories, based on the maturity, credit quality, and interest rate sensitivity of the securities they invest in. Investors who choose debt funds for short-term should have a short to medium-term horizon and select funds that match their risk appetite and return expectations.

How to Create a Balanced and Diversified Portfolio

Having a balanced and diversified portfolio is essential for achieving optimal returns and minimizing risk. A balanced portfolio is one that has an appropriate mix of asset classes, such as equity, debt, gold, and cash, based on the investor’s risk profile and time horizon. A diversified portfolio is one that has an adequate spread of investments within each asset class, such as different sectors, themes, and geographies, based on the investor’s return expectations and market outlook.

To create a balanced and diversified portfolio, investors should follow these steps:

  1. Assess your risk profile: This involves determining your risk need, risk-taking ability, and risk tolerance, which are the three factors that influence your risk profile. Your risk need is the level of risk you need to take to achieve your financial goals. Your risk-taking ability is the level of risk you can afford to take based on your income, expenses, assets, liabilities, and time horizon. Your risk tolerance is the level of risk you are comfortable with taking based on your personality, preferences, and emotions. You can use a risk-tolerance questionnaire or a risk-profiling tool to assess your risk profile.

  2. Allocate your assets: This involves deciding how much of your portfolio to invest in each asset class, such as equity, debt, gold, and cash, based on your risk profile and time horizon. You can use a strategic asset allocation approach, which involves setting a long-term target allocation based on your risk profile and sticking to it regardless of market fluctuations, or a tactical asset allocation approach, which involves adjusting your allocation based on short-term market opportunities and expectations. You can also use a hybrid approach, which involves combining both strategic and tactical asset allocation methods.

  3. Select your investments: This involves choosing the specific investments within each asset class, such as stocks, mutual funds, bonds, REITs, PPF, FDs, SGBs, or debt funds, based on your return expectations and market outlook. You can use a top-down approach, which involves selecting the investments based on the macroeconomic factors, such as GDP growth, inflation, interest rates, and exchange rates, or a bottom-up approach, which involves selecting the investments based on the microeconomic factors, such as company performance, earnings, valuation, and competitive advantage. You can also use a hybrid approach, which involves combining both top-down and bottom-up methods.

  4. Review and rebalance your portfolio: This involves monitoring your portfolio performance and comparing it with your financial goals and risk profile. You should review your portfolio at least once a year, or more frequently if there are significant changes in your personal or financial situation, or in the market conditions. You should rebalance your portfolio if there are deviations from your target asset allocation, or if there are changes in your risk profile, time horizon, or return expectations. Rebalancing your portfolio involves selling the investments that have performed well and buying the investments that have performed poorly, to restore your portfolio to its original or desired allocation.

How to Assess the Risk of Your Investments

Assessing the risk of your investments is important to understand the potential losses and volatility of your portfolio. There are different methods and measures of risk assessment that you can use to evaluate your investments, such as:

  1. Standard deviation: This is a measure of how much the returns of an investment vary from its average over a period of time. It indicates the volatility or uncertainty of an investment. A higher standard deviation means a higher risk, as it implies more fluctuations in the returns. A lower standard deviation means a lower risk, as it implies more stability in the returns. You can use a calculator or a spreadsheet to calculate the standard deviation of your investments.

  2. Sharpe ratio: This is a measure of how much excess return an investment generates per unit of risk taken. It indicates the risk-adjusted return or the reward-to-risk ratio of an investment. A higher Sharpe ratio means a higher return for a given level of risk, or a lower risk for a given level of return. A lower Sharpe ratio means a lower return for a given level of risk, or a higher risk for a given level of return. You can use a formula or a spreadsheet to calculate the Sharpe ratio of your investments.

  3. Beta: This is a measure of how much the returns of an investment move in relation to the returns of a benchmark, such as a market index. It indicates the systematic or market risk of an investment. A beta of 1 means that the investment moves in sync with the benchmark. A beta greater than 1 means that the investment is more volatile and sensitive to the market movements than the benchmark. A beta less than 1 means that the investment is less volatile and sensitive to the market movements than the benchmark. You can use a regression analysis or a spreadsheet to calculate the beta of your investments.

  4. Value at risk (VaR): This is a measure of how much money an investment or a portfolio can lose within a specified time period and confidence level. It indicates the worst-case scenario or the maximum potential loss of an investment or a portfolio. A higher VaR means a higher risk, as it implies a larger possible loss. A lower VaR means a lower risk, as it implies a smaller possible loss. You can use a historical, parametric, or Monte Carlo method to calculate the VaR of your investments or portfolio.

Contact me oppatel@costless.blog

0 views0 comments

Comments

Rated 0 out of 5 stars.
No ratings yet

Add a rating

About Me

oppatel

I'm a finance and tech expert who shares practical tips for financial freedom on my blog. Follow me on social media for daily inspiration and advice!

Posts Archive

Keep Your Friends
Close & My Posts Closer.

Thanks for submitting!

bottom of page