Building an investment portfolio is an important task for every investor and a decisive condition for future success. An investment portfolio is a set of financial instruments held by an investor aimed at preserving and increasing cash. Such a set may consist of stocks, bonds, mutual funds and other instruments. They differ not only in the basic characteristics, but also in the level of risk and profitability. Let’s see how to create an investment portfolio that’s right for you.
By trading on the stock exchange, you can both receive income and suffer financial losses. In order to minimize the risks, we advise you to observe the following rules when creating an investment portfolio:
Before you start trading on the stock market, clearly state your financial goal. For example, if your main objective is to preserve and grow your investment with minimal risk, a conservative strategy will suit you. It is particularly suitable for novice investors.
Your investment capital should be spread across different assets. You need to diversify your investments. Even if one of them brings a loss, then the growth of the others will be able to compensate for these losses. Let’s take an example of how diversification works. Let’s say you bought shares of Air France, Orange and Total. All these companies belong to different sectors of the economy. In the event of a crisis in our country, these securities can “sink” with the expected income. Therefore, add securities from different countries and different sectors of the economy to the portfolio.
Liquidity is understood as the ability to quickly and profitably sell assets on the exchange. We recommend that novice investors buy instruments with high liquidity.
In this guide to online investing, we’ve already covered the key things to look out for when building a portfolio, but that’s not enough. In order to consciously choose investment instruments and achieve the right results, it is important to know a few rules.
Don’t spend all your money buying stocks. For novice investors, this approach can be very risky, as the value of stocks is highly dependent on changes in the economy and this value can change drastically.
Don’t trust everything you are told. The hottest stocks can be overvalued, that is, they are selling well above their true value. We advise you to independently study the financial indicators of the company:
Speculation involves the receipt of income from changes in the value of a short-term asset. For example, you bought a stock for 10 euros and you expect that in a few days its price will reach 12 euros. In practice not everything happens this way and the time to reach this value can be long.
Read financial analyzes and connect to reliable sources of information. You can rely on the advice of experienced investors, find up-to-date ideas and make a selection of promising stocks on the broker’s website. Thus, based on forecasts and various analyzes, you can make a decision about investing in a particular asset. However, it is important to remember that you alone are responsible for your decision and no one can guarantee you 100% future results.
Define your risk profile before you start trading. This is necessary to understand which investment instruments are suitable for you. The risk profile can be: