How to create an investment portfolio from scratch? 3 easy steps
Reading time: 5 minutes
Today only people far from the information space have probably not heard about bank and insurance deposits. Deposits are customary, most reliable and stable investment instruments, which, according to the NAFI report for the last year, are now used by more than a third of Russians!
No, stability and reliability are, of course, good. However, now the average maximum annual interest rate on deposits is about 6%, which excludes the possibility of considering this method of investment as an additional source of serious income. Deposits are a great way to save money and offset inflation, but, unfortunately, nothing more.
In order to really start making money on investing, you need to go to the stock market and start learning (start with our special section), what distinguishes bonds from stocks and mutual funds from ETF funds.
Having dealt with the definitions, there are fair questions – and with what, in fact, begin, what to buy and, most importantly, in what amounts? The answers to them lie in the phrase “investment portfolio.”
What is an investment portfolio and why is it needed?
In simple words and without water:
“The investment portfolio is a set of securities of different duration and liquidity, which are owned by one investor and managed as a whole”
The main goal of creating an investment portfolio is to diversify risks, that is, to reduce them by distributing investments between non-correlating instruments. Only such an approach can consistently generate profits in the long term.
Investment portfolios are of three types and depend on your goals and investment strategy:
Growth portfolio – to form such a portfolio, shares of companies whose market value has historically increased are used. The total (capital) value of this type of portfolio increases due to the rising prices of the instruments used.
Income portfolio is a type of portfolio focused on receiving high dividend and current income. For the formation of used bonds, as well as stocks with a good dividend history and stable growth of the market value. Suitable for conservative investors.
Combined portfolio – this type of portfolio includes several types of securities, some of which bring the investor an increase in capital value, and another coupon (dividend) income.
Stages of investment portfolio formation
Learn the stock market
The most important of the stages, not to attach importance to which is equivalent to the loss of total capital. Before you buy or sell any securities, you need to familiarize yourself with the whole wide pool (total number) of instruments on the market, at least superficially, in order to have a general idea of what is happening in the world now.
Choose fixed assets
Start by investing in securities of familiar and familiar companies: if you have an Apple phone or clothes from H & M, then buy their shares – if the company is heard and you yourself trust it, then this is an essential sign of its financial stability and some guarantee from force majeure situations. Although, of course, anything can happen on the stock market.
Pick up a few additional tools that are independent of each other.
In order to identify tools that are less dependent on each other, distribute your investments between various industries or assets: if you have acquired shares of an IT company, then think about the market for medical devices. In addition, your portfolio may consist not only of securities: it may include precious metals, currencies, as well as various derivative financial instruments.
What to do next?
Once you have formed a diversified investment portfolio, do not rush to relax and wait for profit without care. Now the portfolio will have to regularly monitor and adjust the tools used.
The main points that you will need to pay attention to:
Keep track of your deposit balance
The value of your assets will then grow, then fall at different intervals. You need to “restore” the balance of deposits, if a large proportion of the assets of your portfolio goes beyond the adequate framework, getting rid of instruments that are too dependent on each other.
In addition, it is very important not to keep too much money in one investment direction due to the direct relationship “investment / risk level”.
Look for new investment opportunities.
Do not stop following the stock market and, in particular, the companies whose dividend payouts have been increased by historical standards. Constantly being in search of new profitable trading tools, you are unlikely to lose control over the situation and be able to increase the profitability of your portfolio.
Create a Bond Ladder
This can be done by purchasing various bonds with