Sunday, August 7, 2016
A Question Of Balance: Building The Perfect Investment Portfolio
One of the things you will also hear from professional investors is that building a balanced portfolio is vital to any investment plan. But how do go about finding balance when you are just getting started? We’re going to spend today discussing how to do it, and explain some of the essential steps you will need to take.
Balance is not just about your investments
The first thing to understand is that a balanced and successful portfolio is not just based on your investments. There are plenty of other factors at play here, from your personal financial situation to the length of time you have to grow investments. It’s not only about what assets you have, but it’s also about your everyday savings and ability to take on financial risks. Your home and work life is a big factor, too. Will you have the time to dedicate to making your investments work harder, and will it affect your ability to work or be a great husband, wife, or parent?
Defining your strategy
Once you understand your ability to invest - and everything that goes along with it - you can start planning your strategy. If you are comfortable and have plenty of savings, for example, you might wish to pursue an aggressive, high-risk strategy. If you have limited funds, however, it’s going to be safer looking into bonds and fixed-income securities. In general terms, the more risk you can afford, the more aggressive you can be.
Choosing the assets
The next step is to choose the perfect assets for your circumstances. Not every investment opportunity is going to be a good match. Take stock picking as an example. You need to have a thorough understanding of the industry you want to invest in if you want success. There is help available, of course. As the guys from Primary Stock Trading point out, there are plenty of stock picking newsletters you can sign up to. Each of them has their success stories, but you should always be careful and read reviews before handing over any cash. It’s the same principle with other investment opportunities and schemes - always know the market.
Creating the balance
Now the strategy is in place; it’s time to work out you ideal investment opportunities. It’s all about playing the percentages here, so plan your entire investment budget and divide it all up into sections. You might have 50% of your funds in riskier investments, for example, with 30% of fixed income assets and the rest in cash or equivalents. You will also need to create a diversity in the type of investment you have. For example, you might want to invest in a little property but also look at stocks and bonds. The wider scope of investments you have, the more protection you will have if an industry tanks.
OK, so that’s all we have time for today. We hope this has highlighted some of the issues surrounding building a balanced portfolio. Good luck - and feel free to offer any advice if you have it!