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Investment Portfolio: How to Build a Good One

Assets that can be included in an investment portfolio include stocks, bonds, mutual funds, and exchange-traded funds.

Although an investment portfolio is more of an idea than a physical space, it may be beneficial to think of all your assets as being stored under one metaphorical roof, especially in the age of digital investing.

If you have a 401(k), an individual retirement account, and a taxable brokerage account, for example, you should consider all three accounts when selecting how to invest.

How to build an investment portfolio

Determine how much assistance you require

If you don’t want to establish an investing portfolio from the ground up, you can still invest and manage your money without doing so. Robo-advisors are a less expensive option. They construct and manage an investment portfolio for you based on your risk tolerance and overall goals.

Choose an account that will help you achieve your objectives

You’ll need an investment account to start building your portfolio.

Investing accounts come in a variety of shapes and sizes. Some, such as IRAs, are designed for retirement and provide tax benefits for the money you put in.

Regular taxable brokerage accounts are best for non-retirement purposes, such as a down payment on a property. If you need money for an investment within the next five years, a high-yield savings account might be a better option.

Consider your investment goals before selecting an account. You can open an IRA or a brokerage account with the help of an online broker.

It’s also important to know the trading apps you are going to use in your stocks investment. Consider getting guidance on choosing the best stock trading app to make your investment successful.

Your investment strategy should be based on your risk tolerance

You’ll need to complete your portfolio with the actual items you want to invest in after you’ve opened an investment account. Here are a few examples of common investment types.


Stocks represent a small portion of a company’s ownership. Investors purchase stocks with the expectation that their value would increase over time. Of course, there’s still the chance that the stock won’t rise at all, or that its value would plunge.

To help mitigate risk, many investors acquire stocks through funds that hold a portfolio of securities from a variety of companies, such as index funds, mutual funds, or ETFs. If you do decide to invest in individual stocks, you should only allocate 5% to 10% of your overall portfolio to them. Learn how to buy and sell stocks.


Bonds are interest-bearing loans to firms or governments that are repaid over time. Bonds are regarded to be a safer investment than stocks, although their returns are typically lower.

Bonds are known as fixed-income investments because you know how much interest you’ll get when you buy them. Bonds provide a fixed rate of return, which can help to balance out the riskier investments in an investor’s portfolio, such as equities. Learn how to buy and sell bonds.

Mutual funds 

You can invest in a number of mutual funds, but the fundamental advantage of mutual funds over individual stocks is that they give immediate portfolio diversification. You can invest in a broad portfolio of securities, such as stocks and bonds, through mutual funds.

While mutual funds do carry some risk, they are often safer than individual stocks. Some mutual funds are actively managed, however they have higher costs and don’t always outperform passively managed funds, which are generally referred to as index funds.

Index funds and exchange-traded funds (ETFs) attempt to replicate the performance of a specific market index, such as the S&P 500. These vehicles have lower costs than actively managed funds since they don’t require a fund manager to actively choose the fund’s investments.

The primary difference between ETFs and index funds is that ETFs, like individual stocks, can be actively traded on an exchange at any time throughout the trading day, whereas index funds can only be bought and sold at the close.

Consider impact investing if you want your assets to have an impact outside of your investment portfolio. Impact investing is a type of investing in which you make decisions based on your values.

Some environmental funds, for example, solely invest in companies with minimal carbon emissions. Companies having more women in leadership positions are among the others.

Determine your ideal asset allocation

So you’ve decided to invest primarily in mutual funds, with some bonds and a few individual stocks thrown in for good measure, but how do you figure out how much of each asset class you’ll need?

Your risk tolerance influences your asset allocation, or how you divide your portfolio across different types of assets.

You may have heard advice on how much money to put into stocks and how much to put into bonds. Subtract your age from 100 or 110, according to generally mentioned rules of thumb, to determine how much of your wealth should be invested in stocks.

In conclusion, there are many ways to build a sound investment portfolio. Start by thinking about your personal financial goals, then think about the risks you’re willing to face and how much of your funds you’d like to put into this venture.


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