Whether you’re a fresh graduate ready to face the world or a seasoned wage earner, getting into investments is sure to cause a little excitement. Thinking about how to build your investment portfolio is a good place to start—it should give you an idea of what to look out for when looking at the market and get you thinking about what kind of assets you want.
Table of Contents
What is an investment portfolio?
Simply put, your investment portfolio is a set that may include bonds, currencies, stocks, and other such financial assets. It’s how investors earn from their capital, all while preserving it and other assets. A complete and well-balanced portfolio will have assets of different sorts, each one contributing to the investor’s overall income.
What to keep in mind
Now that we’ve defined what an investment portfolio is, let’s talk about what you need to know before actually investing. It can get intimidating, especially when you’re looking at the portfolio as a whole. Let’s simplify things by looking at these five main points.
Assess your risk tolerance
When we talk about investments, the word “risk” will always find its way into the conversation. That’s no surprise, more so when we consider how much money we’ll be utilizing for our investment tools.
Risk is an unavoidable part of investing, particularly for beginners. Experienced investors might have some way of choosing which investments have the lowest risk for profit but these are techniques you develop over time. That said, it’s important that you define just how much you’re willing to risk before you even start looking for investments. It’s a great way to minimize your losses, especially if this is your first time.
Take Bitcoin investments as an example. Considering how you can buy Bitcoin with credit cards easily these days, you can build up your investment slowly, making the most out of your hard-earned money.
Choose your options
With all the different investment options available to us, this part of the process is a lot easier than people assume. At this point, it’s important to know what kind of investments you prefer. This way, you can do your research on the industry or the business and see for yourself what your chances are at making a profit.
Normally, investment portfolios will have a good spread of different financial assets. It’s a great way to maximize your investment and protect yourself from losses at the same time. Here are a few of the financial assets you can expect to see in a standard portfolio:
- Stocks
- Exchange-Traded Funds (ETFs)
- Bonds
- Mutual Funds
- Real estate investment trusts (REITs)
- Real estate assets
- Cryptocurrencies (e.g. BTC)
A great way to make it easier for yourself is to factor in how much you’re willing to risk and how long you’re willing to wait. This is why the investment habits of retired professionals will differ from that of young wage-earners. Defining these earlier on will help filter your options.
Allocate your assets
As the saying goes: “don’t put all your eggs in one basket.” It’s important to diversify your portfolio as early as now so you can achieve a balanced portfolio later on.
Fortunately, we have more than a few available to us. Cryptocurrencies, for example, have become a great investment tool. With people looking for ways to make money with Bitcoin, buying for the long term has proven to be a profitable investment.
Track performance and invest regularly
Once you’ve made your purchase, it might be tempting to just leave it alone to focus on other things. While this isn’t necessarily wrong in itself, it’s important to keep in mind that constant monitoring is an important aspect of maintaining your portfolio.
The reason this helps is that you’re able to compare performance against time. This helps you prevent time-wasting on investments that are just not worth it, allowing you to shift your money into something worthwhile.
What would help here is establishing some sort of tracker earlier on. It doesn’t even have to be graphical, all you need is something that will help you study the numbers.
Rebalance your portfolio
As you monitor your investments, you will begin to see patterns that you can use to your advantage. This is the perfect time to find gaps in your portfolio as well, giving you a clue as to what you might be missing out on.
A well-balanced portfolio is a great way to ensure reasonable profits every quarter, therefore maximizing your investments. After all, with the risks you’re facing you’ll want to be sure to make a profit at the end of it.
Making worthwhile investments
Determining your goals is just as important as the investment itself— it’s pretty much a mental game. Defining your goals earlier on will help you check yourself and make sure you stick to the plan.
The bottom line is that you should do your own research before anything else. With a proper foundation of investment know-how, you can be a lot more decisive with any investment you might make.
*The content of this article is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. You should do your own research and may want to seek professional advice before making any decisions.
