Elements your financial investment portfolio must have in 2022 – Forbes Advisor INDIA

2021 has been an exceptional year for the markets. Stock markets have reached new heights and added to the wealth of investors. However, as the year was about to end, the novel variant of the novel coronavirus, Omicron, spooked investors and markets experienced a major correction.

The Sensex and the Nifty declined, leaving investors worried. Things started off on a shaky note in 2022. However, having these items in your wallet can help you weather tough times with ease and preserve the gains you’ve made over the years.

1. Asset Allocation

An evergreen strategy, asset allocation saved many people from the bumpy fall of March 2020, when markets crashed significantly. Even this year, you need to stick to the principles of asset allocation and make sure you’re diversifying optimally based on your goals and risk tolerance. Prudent asset allocation will help you navigate choppy waters with ease, balance your portfolio, and ensure gains don’t erode.

Aspects to consider for asset allocation

Financial goals

A holistic view of your financial goals will help you gauge the returns you want your portfolio to generate over a given period. Divide your goals into three main categories: short-term, medium-term, and long-term. While short-term goals might be to build an emergency corpus or go on vacation, making a down payment on a house or buying the dream car might be categorized as medium-term goals.

On the other hand, your child’s higher education and retirement are long-term goals. For short-term goals you can invest in debt securities, while for medium-term goals you can invest in aggressive hybrid funds that invest in a combination of stocks and debt. To secure long-term goals, it is prudent to invest in pure stocks to earn returns that beat inflation.

Risk appetite

This is another crucial aspect you need to consider for optimal asset allocation. Risk appetite refers to your ability to bear risk. If you have a low risk tolerance, it doesn’t make sense to invest in high-risk instruments. On the other hand, if you have a high risk appetite, you can better manage volatility. Invest in financial avenues that match your risk tolerance.

Investment horizon

The investment horizon refers to the time you need to stay invested in order to achieve your goals. The investment period can vary between 6 months and one year for short-term objectives, while it can be five years for medium-term objectives.

On the other hand, the horizon could be 15 to 20 years or more. Divide your investments into different assets according to your investment horizon. If you dabble in stocks, be sure to stay invested for the long term, as this is a volatile asset class in the short term.

2. Balanced Advantage Fund (BAF)

Adding a Balanced Benefit Fund or BAF to your portfolio can help you take advantage of the bull and bear market. BAFs follow a dynamic asset allocation strategy in which the fund manager alternates between equities and debt depending on the current market situation. Typically, when valuations are high, equity exposure is reduced to protect gains and vice versa.

Adding BAF to your portfolio adds to your wealth during a market rally and protects the corpus from large losses when markets perform poorly. However, there is another significant advantage that BAFs bring to the table. They cut the emotions out of investing. Investors tend to show their worst behavior during the bull and bear market.

They tend to be more adventurous during the bull run and overestimate their risk appetite. In the process, most end up investing at the top. On the contrary, when markets are down, many take the exit route and convert theoretical losses into actual losses. These characteristics have come to the fore over the past two years as markets fell and then rebounded.

However, BAFs help take the emotions out of investing with their dynamic asset allocation strategy and help you take a rational approach to investing. Before choosing a BAF to invest in, review the following:

  • Long-term record against benchmark and peers
  • Underlying holdings
  • Fund manager experience
  • Spending rate

3. Complementary Health

We are all aware of the need for health insurance in our wallet. It not only protects personal expenses during a medical emergency, but also prevents savings from drying up. However, given soaring medical inflation, expanding health insurance coverage is essential, and this is where complementary health is warranted.

A complementary health insurance is a kind of top-up plan that provides you with additional coverage once you have exhausted the insured amount of your regular health insurance plan.

Suppose you have INR 10 lakh health plan and INR 12 lakh supplement plan. If your medical claim is INR 15 lakh, INR 10 lakh will go from the regular health insurance plan, while the supplemental plan will pay the remaining INR 5 lakh.

Supplemental plans are easy to purchase and are affordable compared to regular health insurance plans. Compare several plans and choose the one that best suits your needs.

4. Cash

Emergencies often come unexpectedly and can derail your financial plan in no time. Covid-19 has shown the importance of having an emergency fund, and you need to build one through disciplined saving and investing.

In this regard, you can bet on cash. They invest in money market securities with a duration of 91 days. Since they invest primarily in debt securities, the risks of losing money due to market volatility are quite low. A Systematic Liquid Funds Investment Plan (SIP) can help you accumulate the desired fund.

Whereas previously an emergency fund equal to six months of expenditure was desirable, given the timelines, an emergency fund of one year’s expenditure is ideal. With this fund in your kitty, you can easily overcome lack of cash and ensure key needs are met without hassle.


The new variant of Covid-19 has shaken investor confidence and brought an air of uncertainty. However, having these items in your wallet can help you manage your finances better, ensure you reach your goals, and stay on solid ground.

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