Chapter 1- Introduction
Before reading Healthy Diet approach to Portfolio Management, you should ask yourself a question. Why Equity Portfolio? Why take a Risk? There are many traditional avenues of Investing like Fixed Deposits, Real Estate, and Gold. Take a piece of paper and write down the returns for last 5-6 years on all these safe and traditional Investing avenues. And now subtract the inflation rate from the average annual return. Also subtract the Govt. Taxes. You will be shocked to know that the real returns in most of the safe heavens come in the negative. Is this your financial Goal? If yes, stop reading further Right Now.
Now that you have decided to think beyond these safe instruments of negative return, seek some knowledge about the returns from Equity Markets for the same time period. I am sure you will find the returns much more attractive. You can’t ignore the Equity Markets in Times to come. But what about the risks? These returns may not repeat year after year. This is where you need to develop a healthy diet approach to Stock Market. And can a day of Healthy diet improve/maintain your health? Obviously not. It takes years of disciplined diet management to maintain good health. You need to approach Stock Market also with a similar approach. Forget about short term gains and always plan your financial goals for Stock Market for a longer duration of time. Short term approach is for Traders and not Investors, and Healthy diet approach is meant only for long term investors.
According to Wikipedia, a healthy diet is the one that helps maintain or improve overall health. A healthy diet includes Carbohydrates, Proteins, Fats, Minerals, Vitamins, and other essential components in a proportionate manner. Similarly, a balanced Equity portfolio includes different types of Stocks from different sectors in a proportionate manner. The definition of healthy diet is different for different age groups, lifestyles, environmental conditions. Similarly, a healthy equity portfolio may be different for people with different age groups, financial background, and for different environment settings. We will define all these terms in detail in the coming chapters, and then discuss the functional aspects of healthy portfolio. Interesting? Keep visiting our blog for regular updates.