Creating an Investment Portfolio

You’ve identified your goals and done some basic research. You understand the difference between a stock and a bond. But how do you actually go about creating an investment portfolio? What specific investments are right for you? What resources are out there to help you with investment decisions? Do you need a financial professional to help you get started?

 

A Good Investment Portfolio Will Spread Your Risk

It is an almost universally accepted concept that most portfolios should include a mix of investments, such as stocks, bonds, mutual funds, and other investment vehicles. A portfolio should also be balanced. That is, the portfolio should contain investments with varying levels and types of risk to help minimize the overall impact if one of the portfolio holdings declines significantly.

 

Asset Allocation: How Many Eggs in Which Baskets?

Asset allocation is one of the first steps in creating a diversified investment portfolio. Asset allocation means deciding how your investment dollars should be allocated among broad investment classes, such as stocks, bonds, and cash alternatives. Rather than focusing on individual investments, asset allocation approaches diversification from a more general viewpoint. For example, what percentage of your portfolio should be in stocks? The underlying principle is that different classes of investments have shown different rates of return and levels of price volatility over time. Though neither diversification nor asset allocation can guarantee a profit or ensure against a potential loss, diversifying your investments over various asset classes can help you try to minimize volatility and maximize potential return.

 

Choose Investments That Match Your Tolerance for Risk

Your tolerance for risk is affected by several factors, including your objectives and goals, timeline(s) for using this money, life stage, personality, knowledge, other financial resources, and investment experience. You’ll want to choose a mix of investments that has the potential to provide the highest possible return at the level of risk you feel comfortable with on an ongoing basis.

 

Investment Professionals and Advisors

A wealth of investment information is available if you want to do your own research before making investment decisions. However, many people aren’t comfortable sifting through balance sheets, profit-and-loss statements, and performance reports. Others just don’t have the time, energy, or desire to do the kind of thorough analysis that marks a smart investor.

 

For these people, we’re here to assist you in finding the right mix. Let us help you create the investment portfolio that will get your where you want to be in retirement.

 

Source: Broadridge Investor Communication Solutions, Inc.