Good Essay About Average Portfolio

Portfolio of an average person can comprise of various investments made either through banks, equity market, mutual funds, insurance products etc. The weightage of these products or asset classes in different people’s portfolio depends on a lot of factors such as their income, return objectives, risk taking appetite, liquidity constraints etc. Each market or asset class has its own advantages and disadvantages, which can be related to either liquidity, rate of return, lock-in period etc.
A person can open a savings account through any bank. It offers convenience to park funds and withdraw any amount any time. But it has a low interest rate. Other banking products include checking account and term deposits. Individuals generally do not open checking accounts. Term deposits offer higher interest rate but are illiquid. Equity markets are more volatile and market risk is higher whereas mutual funds diversify some of the risk, but are more costly due to management fee that is required to be paid to the asset manager.
People build their portfolios according to their personal objectives. But there are a few elements which are common to most people’s portfolio. These are savings account, equity investments, mutual funds and insurance products.
Savings accounts are opened through banks and are easy to access. One can deposit money, withdraw money, transfer funds, all through bank branches, internet banking or even mobile banking. ATMs too offer convenience of use and liquidity in emergency. Other banking products generally used by individuals are term deposits, which offer higher rate of interest than savings accounts.
Equity investments offer higher return but also have greater risk. The volatility limits the number of investors. Mutual fund is an alternative, which also enables one to invest in different asset classes through single investment. Insurance products not only offer security but also tax savings, but can be costly depending upon their structure.