If you are considering investing any of your money, then you need to factor in the best way to do it. Taking the time to think about this before you risk any money is highly advised so that you will not be on the end of any nasty surprises further down the line. This is especially true for any new investors who may be fresh to investments and the various options open to them.
What is an investment portfolio, and why is it essential to build one up?
Investment portfolios explained
Simply put, your investment portfolio is all the investments that you have currently made. These can be spread across several investment classes and show the complete picture of your current fiscal investments. As you progress within investing, it is likely that your portfolio will grow and contain more investments. With this in mind, it is vital to keep an eye on your portfolio to see how all your various financial instruments are performing.
Why bother with building a portfolio at all? Is it not wiser to simply have one large investment to keep track of? The simple answer is no. Putting all your eggs in one basket is a disaster waiting to happen. Building a portfolio helps to spread the risk that you face and helps to mitigate any one investment failing to perform.
What are the best ways to build up a comprehensive portfolio?
If you need a few pointers on how to start building a portfolio that really delivers, then here are some key points:
- Think about it first – a well-developed investment portfolio does not happen by chance. You need to think about your own personal needs and circumstances first. How comfortable are you with risk personally? Are you happy to accept a high risk level on the money that you invest, or do you need more security on a return? Are there some investment assets that you favour over others? These are the types of questions that you need to answer for yourself to begin to work out what your portfolio should look like. Someone who loves risk and in effect has money to burn will have a totally different portfolio from someone who is conservative with a need for their investments to perform.
- Forex – one of the best investment classes to have in your portfolio is trading on the forex (FX) market. This is great because it has high liquidity in most cases and can generate a very handsome return when done correctly. For most investors, it is fairly short term, so it is a way of investing without tying up your money for extended periods of time. One word of caution here though – you need to make sure that you thoroughly research the FX broker that you will use to avoid any scams or problems. Check out the list of best forex brokers by Forextraders.com to find a reputable trader that you can trust.
- Consider your other investment options wisely – as well as the FX market, you have a lot of other investment options open to you when building up your portfolio. Make sure to research each one personally and pick those that you feel comfortable with and believe can make a good return on your money. From other financial markets such as ETFs and stocks to other investment classes such as classic cars, fine wine and property, the opportunities when building a portfolio are endless.
- Remember to diversify – when it comes to developing a successful portfolio, diversification is the real secret. If you have a portfolio full of the same kind of investments, then you are wide open to one market crash wiping you out. Instead, try to develop a portfolio that is full of different asset classes to avoid this happening. A simple way for the average investor to achieve this is through mutual funds or ETFs. Although they work in a slightly different way, they give you superb diversification by allowing you to invest in a fund or basket with different asset classes within.
- Review your portfolio at appropriate periods – a key factor when handling your investment portfolio is to review it at appropriate periods to gauge performance. Be careful though – do not get into the habit of checking and changing every day as this can lead to paying many fees and not giving some of your investments a chance to play out.
Building up a solid portfolio is not hard
When you are new to investing, things such as portfolios can seem overwhelming. They really shouldn’t though, as in effect they are quite simple. Take the time to think about what kind of investor you are and then build up a portfolio of diversified assets to reflect that. With so many to choose from, including FX and mutual funds, you will find something that suits you.