Any investor who wants to create and grow their wealth should have an investment portfolio. Wealth creation efforts are less likely to be successful if they are approached haphazardly. Thus, building an investment portfolio is a great way to add the necessary strategy and intention to these efforts.
FBNQuest defines an investment portfolio as a collection of all the assets that an investor owns. It can be likened to a roof under which you house all your investments. A good investment portfolio will be diversified and contain a wide variety of assets such as stocks, bonds, mutual funds, real estate, fine art, gold, among others.
The investment house says that there are five main types of investment portfolios and that they are built with the investor’s financial goals and risk appetite in mind.
The aggressive portfolio – This type of portfolio is specially designed for investors with a high tolerance for risk.
The Defensive Portfolio – This category is for people who have a low risk appetite. Building a defensive portfolio usually involves investing in stocks of companies that will stay in business no matter what. These are companies that manufacture products that are important for daily survival.
The Income Portfolio – The goal of an income portfolio is to generate positive cash flow. This includes stocks that pay regular dividends and provide a stable source of income for the investor. An income portfolio can be a great addition to an investor’s salary or retirement income.
The speculative portfolio
This portfolio is also suitable for an investor with a high tolerance for risk.
The Hybrid Wallet – The hybrid wallet, as the name suggests, is a combination of different assets. This portfolio encourages diversification and offers the investor a diversified portfolio that can include stocks, mutual funds, bonds, commodities, real estate and even art. This category of portfolio has the advantage of flexibility for the investor; it also reduces the negative impact of losses of an asset class.
How to build an investment portfolio
FBNQuest says building an investment portfolio can seem like a daunting task, but it doesn’t have to be. The first step is to identify your financial goals, this will determine whether your money should be invested in short or long term investments. It will also predict what type of portfolio would be best suited to your needs. A portfolio designed for retirement will be different from a portfolio that aims to provide income over the next five years. It is also important to assess your tolerance for risk. Once this step is completed, you will need to honestly take a look at your investment skills, determine if you can build a portfolio on your own, or if you need the help of a financial advisor.
The next step is to decide on the asset allocation. It is advisable to seek professional help for this step of the process.