How do I build an investment portfolio?

Investment Portfolio Knowledge

There is no substitute for qualified, professional financial advice. However, if you’re thinking of investing it’s important to learn as much about it as you can. If you increase your knowledge about investing and your attitude to risk, you will be more comfortable with your decisions. You’ll also have far more constructive conversations with your financial planner or adviser and a good level of control over your investment portfolio.

Investment Risk

One important aspect of investment portfolio planning is finding out how comfortable you are with risk – the chance you may lose some or all of your money. Your investment risk profile plays a large part in determining how you go about building your investment portfolio.

Possible investment portfolios

An investment portfolio will contain a mix of assets based on your investment needs and your risk profile. If you have an aggressive risk profile, you will have a larger percentage of high risk assets in your portfolio. If you are more concerned with stability, your investment portfolio will contain low risk assets.

Your investment portfolio is likely to follow one of five broad strategies:

• Stable
  For investors who need to access their funds in the near future and have a low risk threshold.
• Conservative
  For investors who are looking for some growth but are mostly concerned about protecting their investments.
• Moderate
  For investors who are looking for good long-term returns without large ups-and-downs in the short-term.
• Dynamic
  For investors who are prepared to take more risk in exchange for potentially higher earnings on their investments over the longer term. Dynamic investors are comfortable with volatility and the possibility of negative returns.
• Aggressive
  For investors who are willing to take more risk in search of greater returns. Aggressive investors are comfortable with volatility and with the possibility of negative returns and aim to invest over a long period.

Review

If you really want to maximise your financial potential it’s a good idea to regularly review your investment portfolio. Your risk profile may change due to changes in your life or you may decide that you misjudged your strategy in the first place. Staying on top of your portfolio will help you feel secure about your financial future.