For a long and a sustainable income it is highly important that you have a portfolio. It does not matter what the amount of the portfolio is. It could as per your financial capacity. But one thing is for sure that your portfolio should at least last for 3 years. You have give it time to start earning substantial profits and dividends. While building a portfolio it is highly important that you keep few things in mind.

Capital Allocation

First and foremost determine how much capital you wish to park while building a portfolio. While building a folio, however, always remember Warren Buffett’s quote “Never put all eggs in one basket.”

Say you have a capital of Rs 5 lakh. Make sure you invest in at least 5 stocks, that too of different sectors. In a stock market, investors usually tend to park monies in cyclical fashion. Hence, your capital will see value appreciation in some stock or the other.

Dividend and Bonus

While building a portfolio, after determining the sector for investment make sure to research on the stocks that provide dividends and bonus like clockwork. Else, your portfolio would be of no use. The portfolio should be engineered in such a way that it becomes an automatic income generating machine (with the help of dividend).

P/E Ratio and PEG Ratio

P/E Ratio shows how much money you are willing to spend for every rupee that the company earns while PEG ratio shows company’s earning with respect to its growth. Hence, the best companies suitable for your portfolio would be the company with low PE ratio (in comparison to its peers) and lower PEG ratio. Go for those companies.