An investment portfolio is an important thing to have. It can help you put your money to work for you, allowing you to build wealth faster and helping you to save for future events. Whether you are saving for retirement or want to buy a new house, an investment portfolio, properly managed, can help you get there.
Steps to putting together an investment portolio
You can improve your investment portfolio with a little advice. Before you get started, it wouldn’t hurt to have a little financial planning meeting with a professional. You will likely pay between $50 and $200, depending on the length and depth of your consultation, but meeting with a certified planner can help you better crystalize your financial goals before you start putting together an investment portfolio.
Next, follow these five steps to your investment portfolio:
- Once you have your financial goals in sight, you need to figure out how long you need to reach your goal. Education, a new home or retirment are all financial goals that you can keep in mind as you are putting together an investment portfolio. And, when you know how long it will take, it can help you determine how much your investment portfolio needs to grow each year in order to be effective.
- Figure out how much money to invest. You need to know what you are comfortable with. Look at your financial situation and figure out how much you can afford to put into your investment portfolio. Try to set aside a set amount of money each month. You can always adjust the amount as circumstances change.
- Next, determine your risk tolerance. This includes how much you can emotionally stand, as well as what your finances will bear. Keep in mind that the shorter amount of time you have to reach your financial goals when you start, the riskier your investment portfolio will need to be. The best approach is to try to plan far enough ahead that your portfolio won’t have to be too risky. When you plan far enough ahead, you can start risky, but move to safer as you approach your goal.
- Research investments and begin deciding which portion of your investment portfolio will be riskier, and which will be safer. Looking into different options such as stocks, bonds and mutual funds, and seeing what is available, is a good idea. Research investments that are likely to produce returns, and figure out which will work best with your risk needs.
- Putting together your investment portfolio with attention to investment diversification is important. As you put together your investment portfolio, make sure that you diversifying your investments across stocks, bonds, mutual funds and cash, as well as across industries and sectors. This will create a more rounded investment portfolio that can withstand the hits that all investments take at some points.
A few more things to keep in mind when putting together an investment portfolio
Saving for retirement is important. If your company has a 401(k) plan, you should sign up, especially if there is matching contribution plan. This will help you build your nest egg. If you do not have access to a company 401(k) plan, there are retirement plans you can open, such as an IRA, a SEP or a Keogh. All of these are also available to the self-employed.
Another thing to keep in mind when putting together an investment portfolio is that you should play it safer if you have less than $25,000 to risk. Starting out conservatively will help you get a feel for managing investments, as well as help you avoid losing money you can’t afford to lose.