The year 2021 was a favorable one for the markets and investors. But 2022 is off to a bumpy start as Covid hits normal life again with its new variant Omicron. But it is not as if you cannot do anything to minimize or even avert the loss the instability causes to your wealth. Going through personal finance books to plan ahead can be the right way, but it’s not a way for everyone. So here’s what you need to know while preparing your investment portfolio in 2022.
1. Asset allocation
If you want to sail through the bumps in the investment road in 2022, the best place to start is to stay true to the principles of asset allocation. Here are a few things you might wanna consider while doing asset allocation.
You need to know what do you intend to receive at the end of the investment you are making. It is better to organize these goals in a timeline of short, medium, and long-term goals.
Can you take higher risks? If yes, you are in for a possibility of higher rewards. People with low-risk tolerance on the other hand have more surety of positive returns, but a lot lower than a high-risk investment. People generally have a combination of high, medium, and low-risk assets according to their risk tolerance.
Investment horizon refers to the time period for which you are making the investment. Young people can make long-horizon investments while people at 70 should consider something that gives early returns.
2. Balanced Advantage Fund (BAF)
Balanced Advantage Fund is a dynamic asset allocation strategy that lets you take advantage of both a bull and a bear market. When the market is rallying, the BAF overestimates its risk tolerance and ends up investing at its peak. When the market falls down sharply, it shifts gears to prevent any sudden loss of the portfolio.
3. Top-up health insurance plan
Health insurance can help you prevent out-of-pocket healthcare expenditures. But once the limit gets exhausted, you will be back to spending from your pockets. Top-up health insurance allows you to expand your plan coverage if you have already hit the limit.
4. Liquid funds
It’s important to invest but it is far more important to have a liquid emergency corpus that you can tap into in times of sudden distress. A systematic investment plan (SIP) into a liquid emergency corpus proves very helpful in achieving your desired corpus target without much difficulty.
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