What are Model Portfolios | Why do We Need Them?

3 min read
In this article, we will discuss what are Model Portfolios, why do we need them to meet our financial goals, major advantages of model portfolios in detail.

Advantages of Investing in Model Portfolios

Introduction

In this article, we will discuss what are Model Portfolios, why do we need them to meet our financial goals, major advantages in detail.

Ready-to-implement Model Portfolios by Invest Yadnya
Ready-to-implement Model Portfolios by Invest Yadnya

What are Model Portfolios & Why do We Need Them?

Model Portfolios – Explained

  • As investors, we look for investments that give us returns commensurate to the risk we take. Model portfolios are assets that are grouped together with pre-specified weights to provide an expected return in line with the amount of risk taken.
  • So, Model Portfolios are diversified group of assets designed to achieve an expected return with the corresponding of risk.
  • These portfolios are created considering in mind different requirements of investors based on their risk profile and thus accordingly helping investors in making broad asset class allocation decisions.
  • How do you decide what percentage of your investments to be done in equities, what percentage in debt and how much in liquid funds?
  • An individual’s risk tolerance, investment time horizon and the financials goals are the key drivers in a strategic asset allocation approach.
  • Model Portfolios are comprehensive and ready-to-implement investment guide that can deliver :
    • Expertise
    • Diversification
    • Flexibility

Key Advantages

Model portfolios are simple and effective tools to get access to institutional investing level research and investment strategies.

Advantages of Model Portfolios
Advantages of Model Portfolios
  1. Investment and Fundamental Research : Asset allocation, stock and fund selection based on deep research. Knowledgeable experts in the industry design such portfolios by executing an extensive Investment as well as Fundamental research before selecting an asset in the portfolio.
  2. Diversification : These Portfolios offer diversified benefit from multi asset classes by making investment across different asset classes – Direct stocks, Equity funds, Debt funds, Index funds and ETFs etc.
  3. Access to Professional Expertise for Rebalancing : Professional experts review the portfolios periodically. And by considering the investment universe, these experts rebalance the portfolio based on their research and market view.
  4. Transparency – These expertly designed portfolios offer a great transparency with respect to the % allocation to asset classes and sectors included in the portfolio.
  5. Risk Profile Based Investment : A Model Portfolio offers a great Flexibility to investors on account of its ability to choose across different risk profiles which suits best to the investors with different risk appetite.
  6. Long-term View to avoid short-term volatility : These portfolios are created through a dynamic investment approach. In this, experts combine a strategic and long-term fundamental approach with tactical views on economy and markets.

Why Do We Need Model Portfolios?

  • Model portfolios are created by selecting investment assets like Direct equities, Equity mutual funds, Debt mutual funds, Index funds and ETFs. based on in-depth Investment as well as Fundamental research.
  • Thus, these expertly-designed Portfolios help in risk appetite-based asset allocation, sector allocation, stock selection, fund shortlisting and rebalancing decision.
  • As an investor if you are actively managing your own investment portfolio, you need to stay updated on a variety of themes regarding :
    • Changes taking place in capital markets, global economies, Indian economy
    • Sectoral trends
    • Market events
    • Funds
    • Companies
  • It is overwhelming to keep a track of these many themes and then using this gained knowledge to make investment decisions.
  • In these scenarios, you can consider such ready-to-implement portfolios for the portfolio research and portfolio monitoring.

Summary

  • In short, Model portfolios combine a strategic, long-term approach with tactical views to provide diversified asset allocation strategy. These portfolios seek to balance risk and return while navigating changing markets.
  • These ready-made portfolios can be an important tool in the journey to meet long-term investment goals, but one size rarely fits to all type of investors.
  • To suit many types of risk profiles, we are offering three strategies :
    1. Conservative
    2. Moderate
    3. Growth-oriented

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