Building A Fort Knox: Mastering The Art Of Portfolio Construction

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Grip Invest
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Nov 29, 2023
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    How To Build A Resilient Portfolio

    An investor aims to maximise portfolio returns while minimising the risks. An investment portfolio is a group of asset classes in which the investor has invested their funds. Strategic portfolio management enables investors to achieve their financial goals using the right investment tools. 

    An investment portfolio should have different asset classes and diversified funds to beat market uncertainties. A diversified portfolio will be a mixture of equity, cash, debt, commodities, and alternative investment options. 

    Let us understand the importance of building a resilient portfolio and how to frame one to meet your financial goals.

    Importance Of Portfolio Construction In Investment Management

    An investor’s portfolio depends upon income, age, long-term and short-term financial goals, and risk appetite. An effective portfolio management strategy offers the following benefits:

    These benefits can only be obtained with a portfolio that is resilient and created in a way to meet your financial goals.

    What Is A Fort Knox About Portfolio?

    Fort Knox is a US Army installation in Kentucky that stores many of the USA’s gold reserves. It is well protected and is almost impossible to break or enter. You should create portfolios like Fort Knox that are resistant to market volatility and immune to losses.

    Key Principles Of Portfolio Construction

    The primary purpose of building an investment portfolio is to build wealth. Portfolio construction is a dynamic and organised process that enables investors to reach their financial goals in the future. The key principles of portfolio construction are:

    Key Principles Of Portfolio Construction
    1. Assessing Your Financial Situation
      Understanding your current financial situation is crucial to realistic goal setting and meeting your financial objectives. This includes an in-depth assessment of existing investments, cash flows, liabilities, and debt. This assessment helps bridge the gap between the goals and the planned investment strategy. Before constructing the portfolio, investors should be clear about their beliefs, values, and priorities.
    2. Setting Investment Objectives
      Considering your risk-return profile, you must establish detailed investment objectives. This will set a baseline for an acceptable risk level to generate the desired returns. Clear benchmarks that align with investment objectives will help track the performance and progress of the investment portfolio so that necessary adjustments can be made as and when needed.
    3. Asset Allocation Strategies
      You must determine the investment asset classes that interest you. This will help in allocating assets with optimal diversification. Picking the proper assets is crucial because different asset classes respond differently to market conditions. Bonds, stocks, commodities and alternative investments have different levels of volatility, but an investment portfolio should comprise all of them. 
      Younger investors may invest more of their investment in risky assets to generate quick returns. However, investors should look for less volatile asset allocation strategies as they age.
    4. Asset Classes And Investment Instruments
      Once the asset allocation strategy is determined, you must focus on the specific investment instruments for your portfolio. Some assets, like individual equities, need active portfolio management, while others, like mutual funds, exchange-traded funds (ETFs), bonds, etc., are passively managed.
      The choice between active and passive portfolio management depends upon your expertise and the available time.
    5. Building A Balanced Portfolio
      You should focus on building a balanced portfolio that can balance losses from a few asset classes with gains from others. Portfolio management is not a one-time process but is a journey. You must rebalance assets and reallocate investments based on returns and losses with market shifts. It will allow you to sell loss-making investments, book profits, make new purchases, and achieve optimal diversification.
      For long-term investments like retirement funds and long-term savings plans, one must get expert advice to ensure that inflation does not erode the profits.
    6. Risk Management And Mitigation
      No investment is 100% risk-proof. Therefore, you should prepare a portfolio risk management plan to absorb any shocks and market volatility effectively.
      To create risk responses, you must identify, categorise, and classify portfolio risks to create risk responses. Maintaining a portfolio risk matrix and log will help actively manage associated risks.

    Diversification - A Must For An Ideal Portfolio Construction 

    Diversification provides optimal protection against events affecting specific investments. While diversification offers risk mitigation, it does not eliminate all types of risk. You can mitigate market risks, but systematic risks will always result in instability in the overall market. The following tips are helpful to diversify your investment portfolio: 

    • Identify correlations and choose financial instruments that do not always trend up or down together.
    • Assess the cyclical performance of asset classes, including equities, fixed-income bonds, real assets, commodities, and alternative investments.
    • Diversify within asset classes by varying the industries and sectors of the equity market, maturity periods, issuers of bonds, etc. Securitised debt instruments (SDIs) like LeaseX, BondX, LoanX, InvoiceX, etc., offer diversification within debt instruments. They are credit-rated, listed, and SEBI- and NSE-regulated investment options, providing stability and security to your portfolio.
    • Diversify based on global exposure and location of investment instruments by investing in foreign bonds and stocks.

    Portfolio Construction Strategies

    Some common portfolio construction strategies are:

    • A conservative portfolio includes a mixture of fixed deposits, bonds, and defensive stocks, providing stability and modest growth with low risk.
    • A moderate portfolio contains stocks, bonds, and cash equivalents with relatively higher risks to generate better returns.
    • A growth portfolio includes stocks and startup equity that tend to grow in the future with much higher risks.
    • An aggressive portfolio includes stocks and volatile investments such as derivatives, providing the best returns with the highest risk levels.

    You must choose portfolio construction strategies based on your risk appetite. It is best to shift the portfolio towards the conservative side when approaching retirement age to avoid unexpected setbacks. 


    Wealth creation is a crucial financial goal when aiming for a comfortable lifestyle, fulfilling bucket lists, and navigating emergencies. Your portfolio construction plan should be sufficient to meet your goals and resilient enough to protect your principal investment amount from market downturns like Fort Knox. A carefully curated and well-diversified portfolio can bear market volatility and help you reach your long-term goals. 
    Corporate bonds and alternative investments offer numerous non-market-linked investment options to diversify your portfolio Visit Grip Invest today to explore curated, rated, listed, and regulated alternative investments that overstep inflation, volatility, and unpredictable returns and diversify your portfolio.

    Want to stay at the top of your finances? 

    Join the community of 2.5 lakh+ investors and learn more about Grip Invest, the latest financial knick-knacks and shenanigans that take place in the world of investing.

    Happy Investing!

    Disclaimer - Investments in debt securities are subject to risks. Read all the offer-related documents carefully. The investor is requested to take into consideration all the risk factors before the commencement of trading. This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip Invest”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip Invest or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip Invest does not guarantee or assure any return on investments and accepts no liability for the consequences of any actions taken based on the information provided. For more details, please visit 
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