Kalpesh Ashar
It’s election time, and the phrases ‘MahaGathbandhan’ or ‘Single Party’ are heard and debated anywhere. Everyone seems to have a robust view on the pros and cons of a methodology that appears to be useful to them in the political context. Relax, before you get excited to read any political undertones in this text, allow me to let you know that this isn’t the subject we will be discussing or debating right here.
What’s unexpected is when those words are used as an analogy inside the context of investment behaviour, highlighting the deserves of diversification (MahaGathbandhan – Alliance of various parties) vis-à-vis the merits of attention (Single Party) in a funding portfolio, they do generally tend to throw plenty of thrilling records which convey quite a few merits.
Reams of print had been committed to the virtues of diversification in an investment portfolio. This has been the maximum normally used and customary procedure. Various financial merchandise are brought together, and each of them has its own personal features. It isn’t always essential that everyone is a certain shot alpha generator with a high chance or a cozy product with a low chance. It is the collective of these kinds of products in varied proportions that we term as diversification from the attitude of a financially savvy character or an evolved investor.
What is more exciting and interesting is that while we discover this issue from the alternative end of the spectrum, i, fromom the point of view of a layman or an uninformed investor (unfortunately, this elegance of buyers shapes a majority).
For them, diversification has a different meaning. Their portfolio could have a mix of real estate, gold, and large unutilized sums from their bank savings account. They strongly agree that there’s confident growth handiest in real estate with a constant profit element, and the balance in the savings account is their expense-cum-emergency fund.
There is no hint of equity investments (for them, the stock marketplace is all about speculation, mutual funds are risky products, and so on), and in debt investments, they will at most have a public provident fund (PPF) and a small amount in a financial institution constant deposit.
For the ‘Single Party’ believer, there’s usually a bias toward a selected asset class, and their so referred to as ‘evolvement and diversification’ takes place in that one asset class itself. They may have investments best in real estate and proudly proclaim that they may be varied across residential, assets, industrial property, and plots. This applies to the investor’s eternal love of the ‘yellow metal in which the conserving is to start with in jewellery, bars, cash, and once they evolve, they start investing in Gold ETFs!
The third and the most prolific one is the ‘Insurance cum Investment portfolio Diversification’ where the coverage holders who consider they may be ‘Investors’ have traditional endowment rules, entire existence rules, cash lower back guidelines and ULIPs of their portfolio. The best policy lacking in their portfolio is a pure term plan (who desires it anyhow!).
