Build your portfolio - Plan the investments

Now here is where I differ from most Financial planners. I think a good financial planning needs to be looked at from 2 dimensions and needs to be done in a very simple way. First step is to look at all your current financial assets. And write down your balances in each of the areas. Include things like amount, amount last month, whether liquid or not and the type (bank, equity, bond, gold). These include
1. Cash on hand
2. Bank accounts with different banks
3. Real estate
4. Equities (write down just the sum - instead of listing all the stocks)
5. MFs (sum instead of listing all the funds)
6. others

Do this for each bank, each account you have. This will give you an idea of your total net worth. This will be a revelation if you have not done this before. Do this in a spreadsheet to give you ability to do some analysis. Now understand your percentage split between cash, FDs, equities, real estate, gold etc. Match this up with your risk profile and see how you fare in terms of your portfolio split. Rule of thumb - If you are risk neutral your equities should be about 40-50%. The rest should be about 10% each.

This completes step one. We will discuss step 2 in the next post. This is to look at your monthly scenario and how to map it back to your portfolio. I do have a simple spreadsheet to manage all this. Will share it after the next post...till then...happy thinking!