Candlestick Trading Blog
January 25, 2008
Investment Portfolio
Creating Your Investment Portfolio The first and most important step in creating your investment portfolio is that you must identify your personal and financial goals and objectives, along with a time-frame for completion. In order to do this, you must also understand the investment basics and understand what kind of investment risk you are willing to take. Understanding the difference between stocks and bonds, fundamental and technical analysis, mutual fund investing, etc., will enable you to build and investment portfolio that you are comfortable and happy with. Portfolio Diversification A good investment portfolio should be well diversified in order to spread your risk. Once you understand the difference between the different investment options mentioned above, it is important to ensure that your investments vary in their levels of risk so that you minimize exposure. When speaking of portfolio diversification , it is necessary to speak of asset allocation. By allocating your assets, you are diversifying a portfolio among various categories, known as asset classes. This concept is used to structure a strong portfolio so that it operates in a purposeful manner. For example, you may put 60% of available capital in stocks, 30% in bonds, and the other 10% in cash. Understanding the risk reward ratios associated with you investments will assist you in the decisions needed to build your investment portfolio. Seek Professional Help (and I don’t mean therapy) If all of this information makes your head spin, you may find that seeking help from an investment advisor is the way-to-go for you. There are three types of professionals that can help you to build your investment portfolio. I’ve offered a quick explanation of each below that should help you when deciding what type of assistance you would like. 1) Stockbrokers – This type of professional typically works on a commission and works for a brokerage firm. Their knowledge is variable so you need to be sure that the stock broker you choose has the skills and knowledge needed to carry out your financial objectives. It is best to go with a broker that is highly recommended by someone you trust, and/or that has very strong references. You can also look into obtaining and online discount broker for typically a smaller fee to assist you in building your investment portfolio. 2) Financial Planners – This type of professional offers a wide array of financial assistance ranging from retirement investing, to asset protection planning. He or she will look at the ‘big picture’ and help you to plan ahead. When choosing a financial planner to assist you with your investment portfolio, examine each one carefully. Since they have a wide array of services and expertise you need to be sure to ask for their qualifications to ensure that they have the proper credentials. They can be either fee or commission based so you will need to check with each one individually. 3) Professional Money Managers – This type of professional will design an investment portfolio that is customized to fit their client’s investment objectives. There are typically management fees as well as a fee based on the percent of your assets in your portfolio. This type of advisor used to only be available to the very wealthy, but has since come down in their fees due to tough online competition by the discount broker mentioned above. There is a ton of information that you must know before building your investment portfolio successfully. Do a lot of research and try to find a trusted advisor to help you throughout the process. Most importantly, be sure that the advisor that you select to assist you with your portfolio management (if you go that route), is on the same page with you in regards to your risk tolerance. This will help your professional relationship and will also ensure that you sleep better at night! Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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