Wealth Creation – The SAFE Way
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Wealth Creation – The SAFE Way
During a portfolio review, you sit down with another photographer or photo editor to talk about your work. Beforehand, you decide what you want to present and compile it into a portfolio. In the past, this used to be a physical folder of printed images, but these days it can also be a digital collection or even a social media profile.
Having a portfolio review means getting a professional’s opinion on your work. You get to lay out what you’re shooting, how you do it, and talk about how your current approach serves those goals. But more than discussing just individual pictures with you, a portfolio reviewer will look at the overall visual language of your work and how your photos work in context.
Photography has become incredibly accessible: Thanks to advanced digital cameras and smartphones, it’s become a lot easier to take a good photo. Because of that, it’s become more important than ever to contextualize your shots: To shoot in a way that lets them work together and to combine individual pictures for a greater visual effect. Reviewing your portfolio means considering all of your work together, and it can be an eye-opening experience—both to see how it is perceived and to put it together in the first place.
The primary objective of portfolio rebalancing is to establish better risk control, and ensure that your portfolio isn’t singularly dependent on the success or failure of a particular investment, asset class, or fund type.
Rebalancing works as a risk-minimizing strategy for you as an investor. It allows you to line up your investment with your goals by periodically rebalancing your portfolio. If your risk tolerance or your investment strategies change, then you can rebalance the weight of the asset class in your portfolio by reassessing and devising a new asset allocation.
When you invest in mutual funds, you are investing to achieve a single goal via various vehicles. So when you rebalance, the shift must occur across all of these funds at the same time.
Here’s how you can rebalance your portfolio in 5 simple steps:
Step 1: Primarily, have an asset allocation plan by considering your income, the expected time of retirement, and so on. Create an asset allocation framework, but if you are unsure speak to an expert – Safe Assets can be of help here.
Step 2: Assess your current asset allocation by identifying where and how your current investments are placed in stocks, cash, bonds, or any other form of investment. After this, make a comparative analysis of asset allocation target and its present state and make adjustments accordingly.
Step 3: Chart out a rebalancing plan is your asset allocation target does not align with your current portfolio. This step can be tricky where you have to decide on the securities to retain and in what numbers. Speak to our experts at Safe Asset to get clarity.
Step 4: Be mindful of the tax implications, especially on capital gains. Avoid the short term taxes on capital gains by holding on to your equities for over a year. In the case of debt funds, the short-term capital gains will qualify for taxes based on the individuals’ income tax slab. For long-term capital gains, the tax is 20% with indexation. If you need to scale back, aim to sell the securities in the tax-exempt accounts first. In this way, you can limit the taxes you pay in capital gains.
Step 5: Review your portfolio at least once a year or maybe once in six months to assess your position but rebalance it only when you feel that the allocations are significantly out of the track to reaching the target.
All this made it increasingly difficult for investors to navigate through the maze of funds and identify the right ones for their needs.
To simplify the process of selection of appropriate schemes and to help investors make more informed decisions, the Securities and Exchange Board of India came up with a new system of fund classification.
The new system aims to bring uniformity in the schemes, thereby facilitating scheme comparison across fund houses.
Based on the categories that have been defined by SEBI, Mutual Funds have been forced to revisit their entire universe of offerings, and decide which schemes to keep, which to merge, and which to wind down or change the fundamental attributes of.
This move could, therefore, have significant impact on investors' portfolios, forcing them to make suitable changes to them.
According to the new classification, all open-end mutual fund schemes will be placed under the following categories: Equity, Debt, Hybrid, solution-oriented, and others (Index Funds, ETFs, and fund of funds).
Only one scheme will be permitted in each category, except in the case of index funds/ETFs, fund of funds, and sectoral/thematic funds.
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