An investment portfolio is the portfolio of investments made in Shares, Gold, Real Estate, Bonds, Deposits. One should know how should be this portfolio. Which one should have more exposure and which should have less exposure.
First, we shall take investments in shares. Shares are always high risk, high potential investments. They are mostly bullish in the long term. But in the intermediate period, they are bullish at a time and they are bearish at a time. So investments in shares should be made for more than 10 years.
Secondly Gold is always the preferred investment for middle class people. It can be easily liquidated. It also has bullish and bearish cycle. But the bull and bear cycle would be shallow in depth when compared to Stocks.
Thirdly, It is Real Estate. But recently, the myth about real estate that it will be always bullish is tarnished. The 2008 bear market is due to the burst of real estate bubble. But in the long run it will be always bullish.
Fourthly, it is investments in Bonds and Deposits. Surely, it is the most safe investment. But it is the least attractive investments in terms of returns.
Definitely the age plays a crucial role in the Investment portfolio. A model portfolio should have all the investments but the ration should be derived based on one’s age. A young person should have more exposure to stocks and a aged person should have more exposure to deposits.
The year 2008 saw the steepest correction and the year 2009 saw the fastest rally and 2010 saw a minor rally in terms of percentage appreciation. Gold has been in bull run since 2003 and it is making all time highs every month. Now gold is trading near 1400 USD.
Now the million dollar question is, will the bull run in Stocks and Gold continue in 2011 ? For the first time in history, Gold and Stocks are in bull run simultaneously which has puzzled many market pundits regarding the validity of the long believed theory the stocks and gold would always in different direction. Meaning gold will be bullish if the stocks are bearish, and Gold will be bearish if stocks are bullish.
The behavior of any market is cyclical. A bull market will be followed by a bear market and a bear market will be followed by a bull market. And also the magnitude of the bull market will depends upon the magnitude of the bear market and vice versa. Likewise, a multiyear bull market will be followed by a multiyear bear market and vice versa.
Considering this fact, the present bull market in stocks and Gold was started around 2003 and they have been in bull market for the past 7 years, the magnitude of the next bear market is also going to be a big one engulfing many years. The present bull run in the stocks and gold is likely to top out near 2011. So we can expect a top from this year.
