diy: Do you have to be a DIY investor? Ask these questions before creating your investment portfolio

With the advent of digitalization and the Covid-19 pandemic, the stock market has become a source of interest for the younger generation, especially Gen Z and Millennials. The latest bull run had made every investor optimistic about the investment. To tap into the new customer segment that has emerged due to the booming app economy in India, many simplified products are emerging online that encourage users to manage their financial investments in DIY mode.

According to a report titled
‘Millennials at the forefront of the trend are redefining the consumer story’ by Deloitte, millennials choose to do their own research before investing. With a pool of information available on the internet through videos, articles, and more, the tech-savvy generation is outgrowing their reliance on advisers alone.

Let’s dive in and find out what choices millennials and other investors have when it comes to investing and portfolio management.

Do-It-Yourself (DIY) Portfolios: What You Need

With changing times, DIY wallets have also become a preferred choice for investors. If you prefer a hands-on approach, you can opt for the DIY approach where you can perform the asset allocation yourself using Quantum’s proven 12-20-80 formula with underlying capital building blocks equity, debt and gold. This provides diversification in equities, debt and gold and reduces the risk of market volatility.

As its name suggests, Do-it-yourself represents an investment strategy where the investor builds his own investment portfolio. DIY is great if you have the time and energy to research it thoroughly. If you have just started your investing journey, ask yourself these questions-

  • Do you have the right technical knowledge on how to value stock markets?
  • Do you have time to learn the intricacies of stock investing?
  • Have you allocated funds for your mutual fund investing learning journey?

If your answer to the above questions is yes, you can try the DIY investment strategy. After all, it’s best to trust your instincts when it comes to money. Remember that DIY investing is a slow and steady game, just like the tale of “The Tortoise and the Hare”!

Investing in DIY requires a lot of patience, time, and most importantly, research. Personal interest and time are the two important considerations when it comes to researching a company’s fundamentals or reading its balance sheet. In such cases, the multi-asset funds available in a ready made portfolio can be somewhere in between.

Quantum advocated the 12:20:80 asset allocation strategy for DIY investors. Under this, “12” represents liquid financial backup for 12 months. With the Covid-19 pandemic, emergency funds have become a necessity.

Under the strategy, the backup should be enough for investors to help meet their consumer spending needs for the next 12 months. This can take the form of a bank savings or cash account with an underlying investment in government securities, commercial paper or treasury bills.

Then ’20’ stands for gold investment. Of 100% of the portfolio, 20% can be invested in gold funds or gold ETFs. The remaining 80% can be diversified into stocks. This option allows you to do the initial fund research and selection and leave the asset allocation to a fund manager.

And if you are a layman?

Whether or not one understands the balance sheet, one should be able to use the equity investments in one’s portfolio to achieve returns and/or diversify the risks in one’s portfolio. Successfully managing an investment portfolio takes time, desire and knowledge. Once you’re equipped with allocation, managing your own investments shouldn’t take a lot of time. However, you need to know enough to make a reasonable plan and have the discipline and confidence to stick to it.

Is professional help worth your money?

The benefits of working with professional fund management are many. The investor can avoid costly mistakes that can significantly reduce the investment amount. If recent events like Covid-19 or the war in Ukraine are an indicator of volatility, an investment portfolio can quickly swing. No one wants to lose hard-earned money just to learn how the market works.

Professional help can play a central role in financial security and investment planning. Investors can choose a portfolio based on their needs, expectations, goals and risk appetite.

There are two ways to diversify an investor’s portfolio and seek professional management. Thus, investors can decide to do the asset allocation themselves using the proven 12-20-80 formula or gain exposure in a multi-asset fund.

Different kinds of programs are available these days from AMC like Quantum. These range from those offering equity, debt and gold investment options

Out-of-the-box portfolio backed by years of experience

The risk of leaving a self-managed wallet unchecked is very high in DIY wallets. The typical professional or student typically doesn’t polish their portfolio in real time in front of the screen all day.

This is where a ready-made wallet backed by a professionally managed asset management company (AMC) comes in. Ready-made wallets have fund managers who are experts in placement. They continue to monitor movements in various asset classes and make investments based on the program’s investment objective. This leads to a more structured portfolio. In addition to the professional help investors get with a ready-to-use portfolio, they can modify the portfolio themselves if necessary. This offers the best of both worlds, namely DIY and a professional investment plan.

The Scheme portfolio is continuously managed according to market conditions. . The scheme can be considered for investors’ retirement plans, growth plans or fixed income goals. This can save the investor from having to go into the details to make the portfolio profitable.

The program’s portfolio is built by years of investment experience and learning, so investors don’t have to go through the tedious learning process.

It can be said that multi-asset funds can offer ready-to-use portfolios. Since ready-to-use portfolios are a combination of equity, debt and gold diversification with different returns and risk profiles, investors can leave the hassle of finding and allocating funds to AMC, like Quantum.

Quantum Multi-Asset Fund of Funds (QMAFOF) offers a ready-made approach to diversifying portfolios.

In a changing landscape, it is necessary to periodically rebalance the portfolio. You can simplify the asset allocation and balancing process with out-of-the-box asset allocation offered by QMAFOF. QMAFOF is a fund of funds – which has the characteristics of a hybrid fund that offers investors exposure to three asset classes of equities, debt and gold in a single investment.

Spotlight on ET

The managers periodically rebalance the portfolio according to the performance of the asset in question. Along with this, investors can also view their portfolio performance via a single statement.

DIY Investor Product-LabellingSpotlight on ET

Lance B. Holton