The Rainbow Portfolio

Pot of Gold at the end of the Rainbow
Pot of Gold at the end of the Rainbow

Rainbows are the symbol of good fortune and prosperity. In Irish mythology, it is believed that rainbows lead to hidden pots of gold. So what better way to fulfill our dreams … then by creating a Rainbow Portfolio!

So, the most pertinent question that arises is what should be the composition of a Rainbow Portfolio?

Well, the beauty of the Rainbow is the 7 colors and the fact that when these colors disperse together through a Prism, the only color we get is brightness …i.e white.

The Prism Effect
The Prism Effect

Likewise, we should create a portfolio with diverse investment classes which would result in the fruition of satisfactory returns.

As an Individual…

Our risk and return parameters, our investment objectives are different from one another.

That’s why our Rainbow portfolio needs to be customized and diversified. An only equity portfolio or an only fixed income portfolio will fall short of expectation … the essential rainbow element of diversity is missing.

We, at Moneylicious, meet a large number of investors who try to label themselves. Some very proudly declare that they invest only in equities and some solemnly inform that equities are just not their cup of tea. A number of self-employed people announce that their business is risky enough …so they invest in Fixed Income only. These mental blocks actually obstruct the construction of the Rainbow Portfolio.

Every investment asset class has its significance, its pros, and cons.

A Direct Equity Investment is expected to give aggressive returns whereas a Mutual Funds SIP will ensure better returns via averaging out of the purchasing price of your investments.

The Fixed Income investment class will give a consistent return whereas the Equity Catagory returns will boast of Tax efficiency.

A Rainbow Portfolio should ideally be constructed with at least 3 to 4 asset classes: the proportion of investments customized to meet investors risk-return profile.

The Balance between Risk and Returns
Risk – Return Mantra

The more diversified a portfolio, more dispersed will be risk resulting in a more efficient return to your investments.

Don’t just dream for your Pot of Gold … Construct your Rainbow Portfolio today to get your POT OF GOLD !!!

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