How to build an investment portfolio
There is always a degree of positive bias when building a new portfolio. Insomuch as a new investor is likely to think more about the positive aspects of their decision, rather than the possible downsides or risks, “…of course the investment will go up in value because I picked it!”
The reality of investing is a little more complicated. We believe that it is important to take the emotion away from investing and to use a more professionally researched and structured process.
Key stages
We believe that there are four key stages to building and managing an investment portfolio:
- Goals & time horizon
Firstly, you need to clearly identify the reasons for establishing the portfolio. For example, do you want capital growth or to receive an income stream? Is it a combination of the two? Will you reinvest the income? After the initial lump sum, will you make regular contributions (or withdrawals), from the portfolio?
The time frame for investing is also very important. Is it short-term, medium-term or long-term? This will influence the type of investments that should be used within your portfolio.